Blending your goals, time horizon and risk
Want greater clarity in your retirement planning? Find out how the combination of your goals, time horizon and the risk you take could impact on your future standard of living. Let’s model for these factors in our Retirement Planner to help you calculate how comfortable you could be in retirement – and assume an investor has the following profile:
Goals: A target income of £3,000 a month (net) in retirement.
Time horizon: Aged 50 now, wishing to retire at 67.
Risk: Risk level 5 (similar to a 60% equity and 40% bond portfolio).
To fund their goals they are investing £700,000 initially and then £1,250 a month, and we are assuming 2% inflation. The outcome looks like this on our retirement planning tool.
As you can see above, there is a range of potential outcomes depending on how well the investments perform. Yet even if we project an average annual return of 4.1% (after fees), the investor’s money would last until they reach the age of 95.
This simulation is based on the figures in the assumptions above, but they can be changed with ease. Maybe you plan to retire at 70, have £300,000 to invest, plan monthly contributions of £400 and choose risk level 7.
You can calculate that outcome, and numerous other variations, effortlessly.It’s important to note that each scenario can be tailored exactly towards your circumstances, and evolve with them – our powerful technology gives you great visibility as you plan for your retirement. Simply register to use our tools here.
Be proactive – review your retirement plan regularly
Planning effectively for your retirement is not a static commitment. It’s crucial to review your plan regularly – annually is ideal.
You should assess such factors as your investment performance, whether your timeframes are still appropriate, if you have been impacted by tax changes and whether your spending needs have changed. You also may have excess savings from time to time, so it may be appropriate to move them to where your money can work harder if they are lying idle in a bank account.
Whatever the ins and outs of your specific plan, being adaptive and open to evolve with your circumstances will help you to ensure your retirement goals are achieved.