The woes of retirement
Whenever you think about retirement, you probably think of travelling — whether by plane, yacht, or on a cruise — to visit exotic locations around the world. You may imagine activities like golfing, fishing, hiking, or just laying on beautiful, white-sand beaches which stretch as far as the eye can see.
Retirement is what your ideal life should be after working for so many years. Some people may have been planning their retirement for a lifetime, or so it would seem. You imagine the big day when you say, “Goodbye, it was great working with you. Cheers [said with a please-puss smile]!”
However, this is not usually the norm for many people or investors. I find speaking to potential clients close to retiring very interesting because, most of the times, retirement is not something that they think about. Work tends to be intermingled with the retirement years. Some of these clients believe that if they stop working they will stop living. So, despite heading into retirement by a specific age, they are not at the retirement stage. Despite retiring from their official job, they are still on the go, while trying to tick off the bucket list that they have aspired to complete over the years.
Interestingly, the same applies to prudent, savvy, and dedicated fully retired investors who have acquired more than enough money to relax. They have made sound investment choices and are able to reap the benefits of their steadfast investment decisions. However, despite their substantial portfolios, they are still busy working.
One would ask why? Many pre-retirement and post-retirement investors worry about having enough money, assets, and investments to last for their lifetime. Let’s look briefly at some of the major concerns and, to be honest, the worry that surrounds the word retirement.
Inflation – This affects your everyday lifestyle. As inflation rises and continues to rise, it erodes the value of your savings and increases your spending needs. With people living longer and the average lifespan increasing, money management becomes worrisome, and some may start to panic. Inflation cannot be controlled by an investor, so trying to carefully balance expectations year on year can be tiresome and scary to a retiree.
Stock Market Volatility – Even with a diversified portfolio, the volatility of the stock market can make any investors worry. Many of the most consistent investors would have experienced various peaks and troughs over the years. Nevertheless, over time, most retirees just do not wish to deal with the unknown. This is exacerbated by the possibility of losing money during the non-working years of their life when they can no longer deal with the volatility or heart jerks that come with the market. As a result, they eventually sell their holdings as they get older, when the market is in their favour.
Interest Rate Risk -The lower interest rates get, the less income is generated. This causes increased worry because less income means moving around investments in the portfolio and even selling assets to subsidise the shortfall.
Rising Health Care Costs – As we age, so do our bodies. Health-care expenses continue to increase significantly, especially with new advancements in medicine. The fear of the unknown and trying to plan for an uncertain future can be extremely stressful.
If you find that you can identify with these concerns, what should you do? The next step is for you as an investor, whether you are retired or not, to work with your financial advisor as soon as you can so that you can get professional advice to position your portfolio to withstand market shocks and to insulate it as best as possible from inflation, rising health-care costs, stock market volatility, and low interest rates.
Lisa Minto is the assistant vice-president, Personal Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual, and institutional investor. Visit our website at www.sterling.com.jm
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