(lack of) retirement planning

db75

I have a question that is essentially about retirement planning, Im looking for some advice.

I have been self employed for 20 years and have accumulated some savings, my industry is shrinking and I’m starting to think about life after work or at least protecting what i have saved.

I have never had a pension - and over the years have seen a couple of financial advisers but have never found anyone i trust and have a natural suspicion of shares and to be honest the financial industry!

Im 43 and am likely to be out of work shortly but i have had a very busy work life and have saved around 350k - some of which is in an isa (circa 140k) but all at extremely poor interest rates. Im not interested in risking capital but Im concerned that over time inflation will deplete the value of savings, I don’t know anyone who has ever really had any money to invest so I’m at a bit of a loss for financial advice. I realise I’m in a very fortunate position - i would consider property but with brexit on the horizon worry that might not be a great idea.

Any advice very welcome


thanks

AnotherJoe

You are already risking capital (as you sort of acknowledged) by having it in low interest accounts.Risking with 100% certainty. In 20 years teh real value of that will likely halve.Thats extremely unlikely to happen in the long term with some cautious investments but trouble is, if you've had a lifetime of "not risking capital' (and most likely unknowingly losing out big time on what you could have accumulated by investing) its a tough ask to get you to move into any sort of investment.



Maybe Dunston will be along with suggestions, he probably encounters "risk averse*" people like you all the time, I dont really have any since they would be "invest in X fund" and then when it fell by 10% you'd probably panic and sell it all consolidating your loss.



* without understanding they are trading one risk for another, there is no such thing as no risk.

tacpot12

Well done for saving what you have. You are entitled to you opinions on shares and the finance industry. In general, I think the investment side of the industry does a poor job, but things are slowly improving and will only get better if enough customers demand it.

Inflation is a major issue for retirement planning. You only have to do some simple calculations to realise that even low inflation rates lead to the purchasing power of your savings being radically reduced.

Inflation beating savings rates are just not available for cash savings - I'm not sure they ever were but I am sure that they wil never will be in the future. Shares are the only thing that will exceed inflation, so you need to learn to love them.

I would suggest you invest £9,000 (2.5% of your wealth) in the best global equity fund you can find and tell yourself what you will run an experiment for 7 years. At the end of the seven years review whether the experiment has worked. If it has, move 25% of your wealth into the same or similar fund and review after 7 years. If this has worked for you, put 75% of your wealth into shares.

Feel the fear, do the research, and put a toe in the water.

db75

thanks yeah, i see the risk I just dont know how to deal with it at this stage. I saw a wealth managment company and then read lots of criticism about fees / transparency and advice overall so i would love to hear some trusted reccomendations

im happy just to protect against inflation and accept im risk averse. To be honest its been a source of stress for a long time knowing that im eroding savings but not having a solution.


thannks for the quick reply

db75

thanks tacpot

sounds like good advice, although ill be 50 after the first experiment...I wouldnt even know where to begin with research, any pointers?

db75

st james' place is the company i saw, but they wanted 5k to invest my isa and more troubling was the negative press I read

AnotherJoe

db75 wrote: »

thanks yeah, i see the risk I just dont know how to deal with it at this stage. I saw a wealth managment company and then read lots of criticism about fees / transparency and advice overall so i would love to hear some trusted reccomendations

im happy just to protect against inflation and accept im risk averse. To be honest its been a source of stress for a long time knowing that im eroding savings but not having a solution.


thannks for the quick reply

Stay far FAR away from any company that has the terms "wealth management" in its name or its mission statement. They mean their wealth, not yours.

You need a Independent Financial Advisor that can, well, advise, and manage, or you could do some research and DIY. Or you could start off with an IFA and move to DIY later.

db75 wrote: »

st james' place is the company i saw, but they wanted 5k to invest my isa and more troubling was the negative press I read

An astute move.

Alexland

Please don't let your bad experience with SJP put you off investment as a method of growing your money over the long term to beat inflation.

For example you could invest with Vanguard who are one of the world's largest asset managers and are run in the interests of investors with no shareholders (a bit like a building society) so very low cost and high quality. In the UK they offer S&S ISAs (and SIPP pensions soon).

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

A popular choice for a conservative long or medium term investor would be their LifeStrategy 60 fund which is 60% shares (owning a little bit of most listed companies in the world) and 40% bonds for reduced volatility.

https://www.vanguardinvestor.co.uk/what-we-offer/life-strategy-products

On this type of fund you could temporarily see around 25% losses if the global stock markets crashed by 50% but over hundreds of years the markets have always recovered eventually and gone on to make greater gains.

The below article from Nutmeg (not that I am suggesting investing with them...) might help you see that if you invest in a globally diversified fund your chances of losses reduce over time as companies beat inflation and reinvest retained earnings (and dividends if you have an accumulation fund). The daily ups and downs are just noise and you eventually learn to see through it and focus on the long term results you can reasonably expect based on historical data.

https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

Alex

db75

weirdly was an ex colleage recommendation, I was told that they tool a %age of gains and therefore were incentivised but turned out to be far from the case.

I also saw someone at nationwide but I couldnt help thinking that after the fees the stocks ISA is not a great return. optimised mid return on 21,800 showed a projected 25k ( £3200) with almost 3k in fees over the 10 years even if it was 5k it wouldn’t be great after costs.

This was their advice:
The mid-range projection on a level 2 risk portfolio over 10 years comes out to a hypothetical profit of £5,000. This would increase significantly if you were to take more risk which I believe will be the case in the future once your knowledge of investments is improved.

The fee for the advice is a one off £512 paid upfront or can be taken from the amount invested. You will not pay this again if you were to ask me to change the risk profile of your investment at a later date.

The ongoing fee’s estimated over the next 12 months will be £214. But they are taken as a percentage so as the portfolio grows you should expect to pay more per annum than £214. This covers the management of the investment, the administration of the investment and an optional servicing fee payable to the Nationwide.

I see this investment as a starting point for you using your annual ISA allowance and running alongside a pension and the investment property. Giving you a high level of diversity.

db75

thanks alex i'll look into that.

would you advise this over pension? especially given my age...

enthusiasticsaver

I agree steer well clear of wealth management. You either have to be prepared to put the work in to understand investing (I did this a few years ago for the same reason as you in that my only experience with an IFA was not good). Alternatively you could find an IFA on recommendation or make an appointment with one that gives you an initial free interview. As you have already admitted your money is worth less due to inflation and as it will need to provide for 20 to 30 years of retirement if not more then you need it to work as hard as possible.

I follow a couple of rules as I am fairly risk averse. I went for global multi asset funds and have a percentage of fixed term bonds in them as they tend to be less volatile than equities. I keep a fairly high proportion of our overall savings in cash so I am not forced to sell investments during a bad period. I invested gradually and read a lot of articles on monevator, posted a lot of questions on here and did lots of research on the difference between passive and active funds. I started with stocks and shares isas, then opened up a sipp and now also have an income portfolio which is giving me around 3% income monthly in dividends. Why not read up about it, invest this years isa allowance in a stocks and shares isa (maximum £20k) and open a sipp and start paying monthly into it. Look into charges and a low to medium risk fund. You did well to avoid st james place.