Retirement. Peak at the right time

Peaking at the right time is essential for athletes. This concept is also important to retirement planning

Some fitness enthusiasts checking their times after a run together on an outdoor track
Neil Wilkie
Published: 09 Jul 2024 Updated: 09 Jul 2024
Pensions Savings and investments

Athletes create a training regime so that they are on top form for an event. When it comes to your retirement savings, your financial planner will help you to shape, or train, your money so that it fully delivers at the time when it matters most.

Preparation is key

For Olympic athletes, preparation begins around four years before the key event.

When preparing for retirement, ideally your plan should be set into motion years before you want to stop working, but as your financial planner will tell you, it is never too early to start.

Going for goals

Just as an Olympic long jumper sets out how far they want to jump in their next major competition, effectively peaking your retirement finances involves setting out specific goals.

This involves considering at what age you want to stop working (roughly) and drilling down into detail what you want to do in your later years. Think about:

  • Do you want to buy a holiday home?
  • Do you want to travel the world?
  • Do you want to help your children / grandchildren onto the property ladder?

Your financial planner will help you to nail down your objectives.

Your (retirement) training plan

Once your long-term objectives are established, you and your financial planner will start the training that will get you to your end point.

1. Review your investments

Your financial planner will consider whether your current investments are on track to deliver the performance you require. It is a general rule of thumb that the younger you are, the more investment risk you can afford to take.

But this does not mean that you should avoid risk when you are approaching retirement, unless you are thinking of buying an annuity. It is not unreasonable to expect 30 or more years in retirement and it is essential to protect against inflation over that prolonged period as this could potentially reduce your returns. Generally, higher risk means higher returns over the long term but can also mean bigger losses.

Avoiding risk at this stage would be the same as a runner who has trained extremely hard for years stopping training altogether one month before race day because they are afraid of hurting themselves.

Instead, keep your eye on the ball and stay focused on your aims.

2. Use your tax allowances

It’s important to use your allowances early on. Tax planning is essential to maximising your retirement income and avoiding unnecessary tax leakages from your portfolio.

Your financial planner will work with you to ensure you use all your appropriate allowances at the right time so that your savings and investments can deliver when you need them to.

3. Check that you are saving enough money

No matter how far away you are from retirement, it’s important to make sure that you are putting enough money aside to fund your later years. Knowing how much you need to save can be calculated by your financial planner with the help of cashflow modelling.

As people reach retirement age, many of their previous financial responsibilities disappear. Mortgages tend to be paid off and adult children are usually either fully or well on their way towards being financially independent. So, your ability to save for your retirement can increase as you get older.

4. Know when to spend it

Generally, people spend more money in their first ten years of retirement than they do thereafter. While it is important that you don’t spend too much early on and leave yourself short in later life, if you hold on to too much of it at the beginning, there is a danger you will never be able to hit your peak as you will not always be able to enjoy the money you have earned.

In the same way, if you start running a race too slow, you may never be able to catch up with the competition. Again, cashflow modelling will help you here. You’ll see how much you can afford to spend and when, giving you confidence and peace of mind that you can enjoy your money.

5. Stay flexible

Setting objectives is essential to retirement planning, but allowing for adjustments is important, too.

In life, there are often unforeseen events. An adult child might need to move back in with you if they experience a significant change in circumstances, or you or your partner may need additional care.

Your retirement plan will steer you towards your long-term aims but also allows for change.

Crossing the finish line

Planning for retirement is a marathon, not a sprint. It’s important to build your plan up and stick to it.

Remember, the more you train, the fitter you’ll be.

For more information about effective retirement planning, book an initial appointment, call us on 020 7189 2400, or speak to your usual Evelyn Partners contact.