Now is not a good time to invest.
I couldn’t tell you how many articles we’ve published that includes the line “it’s about time in the market, not timing the market.”
We don’t believe it’s possible to time the market consistently over the long term, which means getting in when prices are low and out when they’re high and continuously rinsing and repeating this process.
There is rarely a “perfect” time to invest. Trouble is not hard to find in the world, and this has always been the case.
Recently we’ve had Brexit, Mr Trump, a pandemic and a ship stuck in the Suez Canal!
Very few of us would have predicted these events. Still, despite them, the stock market has marched on in an upward trajectory, albeit with inevitable ups and downs (volatility) along the way.
I’ve got plenty of time to think about retirement.
It’s straightforward to be a passenger in your own life.
People seem to be busier now than ever before, and before you know it, you can be approaching a big birthday and wondering what happened to the years since the last one.
Whether we like it or not, we all need to be thinking about retirement and the future.
We should want to be thinking about it as retirement (or achieving financial independence if you’re not the retiring type), the time where you can enjoy the fruits of your labour.
The longer you wait to think about and plan for retirement, the less time you have to do anything about it, especially if it turns out that you don’t like the look of what’s ahead of you.
Cash is the safest place for my money.
Money in your bank deposit account is readily accessible and stable; it doesn’t go up and down in value like investing in shares, for example.
Everyone thinking about investing should retain a suitable cash buffer.
Long term inflation is the risk that tends to be overlooked by many; we call it the silent killer. Inflation is something you don’t notice day to day but becomes apparent over a 10-20 year (or longer) period.
With interest rates at historically low rates, as the prices of goods and services go up over time, the buying power of your cash decreases.
Yes, investing your money involves investment risk, which should be managed and controlled. But by not taking investment risk, are you simply accepting long term inflation risk and loss of purchasing power of your money?
Only rich people have Financial Planners.
Financial Planning is about planning a meaningful future, one you would enjoy, and then establishing whether you’re on track to achieve this.
You may not be on track and will have steps/objectives to work on to get there.
It may even be that you need to re-think your future plans if they are unrealistic (although they can always be kept in the background in case something changes).
An excellent outcome from a financial planning exercise might establish that you can do more than you thought or retire earlier than you thought.
Although financial Planning with a qualified financial planner is not free, it’s certainly not only for the wealthy.
My state pension will be enough.
The current Manx State Pension (as calculated under the current method) is £10,199.28 a year. On its own, it’s unlikely that this will be enough.
Using the methodology to calculate the Living Wage, the IOM Government believe that a single person requires £19,322 each year on which to live.
The shortfall is glaringly apparent.
The state pension is a good base for your retirement income, but on its own, you might be quite restricted with what you can do.
The state pension age is increasing to 67 and beyond. Do you want to wait until then to reduce your working hours?
I’ll use my house to fund my retirement.
Downsizing is an option when looking to free up capital. For many, your home is your most significant financial asset, so planning to unlock equity in retirement can make good economic sense.
However, don’t overestimate how much equity you may unlock.
You will be in the hands of the property market and the buyer. Your house is only ever worth what someone is prepared to pay for it.
The costs of selling, buying, refurbishing etc., needed to be factored in.
Plus the fact that you may have got used to a certain standard of living and be unwilling to compromise on this with your future home. Money aside, when the time comes to sell up, will you want to?
I’m retired, so I don’t need a plan.
Those retiring in their 50’s and 60’s could easily have 30/40 years ahead of them.
Planning is not just for people saving for retirement; it’s also essential for people who are already retired.
Taking too much from a pension or investment at the wrong time can have significant implications on how long it will eventually last.
Another point to consider is that for most, the amount of money spent each year in retirement doesn’t follow a straight line.
Generally, the early years are more costly when you have the energy and health to enjoy more activities, the so-called “golden decade”. As we age, we tend to slow down, and the cost of life decreases proportionally.
Finally, we may be more focused on provision for later life care, succession planning, and ensuring our financial ducks are in a row for our families and loved ones at this point in life.
It is never too late to make a plan or to review or update an existing one.
If this has got you thinking and you would like to talk to a Chartered Financial Planner, do get in touch.