As you reach retirement, consider keeping money invested in the stock market for as long as possible. This is a higher risk option, but with ‘safer’ asset classes offering little to no income it might be sensible to keep the money invested and rely on a cash buffer to cover your daily outgoings.
FTA: When it comes to 'safer' asset classes, this may well include cash. What's your take on cash assets?
IB: Don't sit on cash. The amount of excess savings that have been built up during the pandemic is staggering. But with cash providing little to no real return, having too much could have a significant drag on your retirement plans.
We all need a level of cash for day to day spending and emergencies but having more than that will cause problems with inflation. Cash is no longer the king it once was for retirees.
FTA: Are annuities a thing of the past?
IB: It used to be that when you started retirement you would cash in your pension pot and buy an annuity.
The popularity of these products has since plummeted with the advent of pension freedoms and with rock bottom interest rates, they are unlikely to provide value for money unless you live to a very old age.
However, if you want the security of a guaranteed income, with an inflation link, then they are definitely worth considering to give you that peace of mind.
It’s never too late to buy an annuity so it’s always worth checking the latest deals throughout your retirement. The older the you are or if your health has deteriorated, the better the deal could be. You should remember, though, that once you buy an annuity there is no going back.
FTA: As Covid-19 hit, we read of people delaying their retirement. Is this a potential part of inflation-proofing?
IB: If you are able to then you might want to consider delaying touching your pension, particularly if you have other sources of income or wealth.
Salaries tend to rise in line with inflation, so this will give you an opportunity to continue to contribute to your pension, take advantage of the tax relief available and invest it to give you above inflation returns depending on your time horizon.
Furthermore, as you reach the later stages of working life, spending on things such as mortgages begin to decline, so make use of any additional savings by stashing it away in a pension. It is effectively the best savings account on the market for the over 50s and should be the last savings you should withdraw from.
