Are you in the Retirement Danger Zone?
The retirement danger zone is defined as the point just before retirement when you are considering what funds to drawdown. Should share prices fall your income in retirement will be considerably reduced. Due to your closeness of your retirement you do not have the time to rebuild. This situation is called the retirement red zone by Prudential.
Approaches to Avoiding Danger Zone Disaster
The issue of falling share price is compounded as many financial advisers are divided on the best way to circumvent the danger zone. Some, like Srinivas Reddy, senior vice president and head of full service investments at Prudential Retirement, believes that reducing exposure to the stock market and equities reduces the share price falling problem.
Anthony Webb, senior research economist at the Centre for Retirement Research at Boston College in the USA agrees. It is not just a question of lack of time to rebuild; it is the fact that you have a lifetime of wealth which could deplete quite rapidly due to events beyond your control. This issue is scalable across the western world.
Mr Webb also feels when you’re younger is the time to take risks with investments, as you have the time to rebuild as the stock market recovers.
The Other View of Equities and Investment
Just when you’re getting your head around exposure to the stock market, along comes another financial adviser with the opposite advice. Jerome Clark, from T Rowe Price believes that reducing exposure to the stock market is the wrong approach. The thinking is driven by a number of factors. One of which is that between the years of 1965 and 2014, pensions which 55% of the fund had invested in the stock market, saw greater returns than other financial models.
The problem is that as we tend to live longer, we could run out of pension cash. This is compounded by low interest rates which according to Prudential increase the chances of running out of funds by 54%.
The Need for Award Winning Financial Advice for your Pensions
There are various solutions which encompass the best of both worlds. One approach is to decide how much you need to live, and invest the rest in the stock market. This way, even if share prices fall you will not have risked everything. Other factors to take into consideration are your health and retirement plans.
To make sense of the retirement danger zone, and simply to make your money stretch as far as possible, contact me today. Click here and complete the CALL BACK SERVICE form and together we will negotiate the danger zone and invest your money appropriately.
Source:
CNBC
For more information, please contact Michele Carby at Holborn Asset Management on +971 50 618 6463 and on e-mail at [email protected]
