Strategies For Wealth Management In Retirement - Part 4

Your goal is to generate sufficient income during your retirement for you to live on and your capital will also need to accommodate events such as medical procedures. In this statement, there is no mention of the word pension. "Pensions" can and do form a useful source of income but when looking at your planning, a more rounded approach will be needed. This is particularly so in the light of the pension issues discussed above. I note that all the proposed solutions for problems in pensions in the sections above are good for the Government or the Company but at a cost to the individual. My experience also shows that people try to simplify their affairs by looking at each type of product in isolation. This leads to poor decision making, bad risk management and accidental duplication of the same asset classes. Planning your investment strategy, to be done in a coherent manner, will require consideration of your total wealth as a whole.

As a starting point, it is anticipated that people will need to allocate their wealth in a manner similar to this example:

Total Capital Put aside an amount for an Emergency Fund Needed both for income replenishment and unexpected capital expenditure. Planned Expenditure Gifts to children, cruise or space travel, vintage car, etc. Medical Fund Hips, Knees, cataracts, 3D printed liver Property The amount invested in your own home should be deducted from your total wealth figure as it does not produce an income. Balance of Wealth To Provide Income and perhaps some capital growth in retirement. Do you already have income?

Do you have a company pension or has your state pension already started and is therefore more likely to be unaffected by changes in future pension policies? Is there any increase in this pension value in line with inflation? Calculate how much income you still need to find now.

Having allocated your capital as above and adjusted for any existing pensions, you need to decide upon what type of income you require in the future. Broadly the choices are level income, income increasing in line with inflation and increasing income in real terms. It is estimated for each of these strategies you need the following:

Level Income (as a minimum) Capital / Income = Life expectancy in years. Increasing Income Income pa = 4% of Capital (See Trinity Study below) in line with inflation Income Increasing Portfolio returns of greater than 4% pa plus inflation in real terms (around 8-10% pa return on your portfolio) Much of this work...