Media reports and forecasts of a volatile financial market, currency devaluations and impending financial crises are worrying at the best of times. If you are nearing retirement, a turbulent market environment is even more so – so how can you adjust for most effective retirement planning?
If you are living abroad as an expat or plan to move abroad to enjoy your retirement, these reports can be concerning since you need to understand how to plan for any market fluctuations and what this might mean for your income streams.
Whilst the global and domestic economy is not something you can control, you can take decisive action to protect your savings.
Our guide to turbulent market retirement planning delivers advice from our expert wealth management team on how to mitigate the impact of market fluctuations and protect your assets from the unknown.
Knowledge is Power
Worrying about the market may be unnecessary, and the first step to being proactive about your retirement income is to know exactly where you stand.
When it comes to retirement income many of your assets may not be impacted much, if at all, by changes in the markets.
If you are planning to relocate, or are an expat and need to keep firm control over your portfolio, appointing a wealth management professional ensures that you stay on top of market changes and are ready to make adjustments where necessary to avoid unnecessary costs and liabilities.
Pension Schemes for Expats
Your pension scheme could be set up against a variety of scenarios, such as a defined benefit plan, in which case your future pension income is secured and simply adjusted for inflation. This means that you can strategically identify which assets might be prone to fluctuations, and which are not, to decide which require your focus.
Remember that the markets will not affect a State Pension or other state benefits plan, and your annuities may provide protection with defined payments which are also not impacted.
Set aside some time to work through your anticipated income requirements and calculate how much of that is provided for by secured regular payments. If you are already living abroad as an expat you will already know about the costs of living and may understand which income streams provide the most tax-efficient options.
Should you be planning to relocate abroad, now is a great time to take stock of the budget you have in place, analysis your plans for renting or purchasing a property, and consider whether any of the market fluctuations demand an adjustment in how you access your income streams.
If you anticipate a gap in your income and requirements, you can take a close look at any non-essential outgoings and consider whether these can be adjusted or cut back to avoid any shortfall. Alternatively, access expert support in leveraging your portfolio in the best possible way to generate the income you require to secure the retirement lifestyle you are planning for – in whichever country that might be!
Long-term Retirement Planning
Many market fluctuations are short-term and are likely to stabilise over time. It is easy to worry about reports about stock valuations but in reality, if this is a short-term blip, the impact on your income streams is probably going to be small and will even out.
Consider recent volatility, and whether this is an ongoing trend, or whether the longer-term value of your investments remains fairly consistent. It may be wise to adjust access to your assets or the order in which you call on those funds to maximise the value of your portfolio and avoid losing out in the long term.
For example, if you are an expat and access income from stocks and shares in the form of dividends and are concerned about the risk factor associated with those investments, it could be worthwhile considering reinvesting in a less volatile market. This secures your income and correlates with your required finances to avoid any changes in your lifestyle.
Planning for Tax Efficiency
Another consideration is your UK State Pension entitlement, which is worth up to £129.20 per week, or £6,719.40 per annum. Overseas UK citizens continue to receive the State Pension abroad and currently, those residing in the European Economic Area (EEA) countries receive an annual increase each year.
Taking stock of each of your sources of income, the expected future value, and comparing this to your cost of living requirements is essential to ensure that you can plan effectively and make any adjustments required.
There are also tax considerations, which your wealth management advisor can break down for you. This can determine which savings vehicles to draw upon, how to protect those assets and drive future fund growth, and how to leverage your portfolio to match your retirement plans.
As you get closer to retirement age and are concerned about volatile markets, now is the best time to consider your stock-to-bond ratio, and take a view as to your risk exposure.
Taking less risk provides a secure investment foundation on which to base your retirement, and alleviates concerns about a turbulent marketplace. One way to steer clear of higher risks is to consider selling stocks and replacing them with bonds.
Investment consultants can make recommendations as to the optimum blend of investments based on your income requirements and appetite for risk, but as a rough example, the standard is to fix the proportion of your portfolio in bonds against your age in years. For example, at age 60, 60% of your portfolio should be in bonds, and by age 70 that proportion should increase to 70%.
When you are looking to relocate to enjoy your retirement, you need to know that your asset portfolio is secure, robust, and invested in the best possible way to provide that ongoing assurance that you need.
Cutting Back on Fees
An often-overlooked aspect of retirement finance is the impact of fee structures on your savings and assets. These can be an added drain on your resources, and in volatile market conditions add to the frustration of chipping away at your retirement finances.
Choosing an accredited and reputable wealth asset management advisor is the best way to access the highest standard of advice.
Other costs include drawing down fees, early payment penalties, bank transfer costs and administrative charges. These are sometimes difficult to find within your account documentation, so seek out clarification as to exactly what fees and cost structures will be incurred to keep a close eye on unnecessary fees and minimise these wherever possible.
Should you be in any doubt as to what the costs will be to access parts of your portfolio, or how to reduce those outgoings to maximise your income and return on investments, get in touch and we will be delighted to walk it through step by step.
Maximising Tax Efficiency
Taxes are there at every stage of our lives, whether you are retired or not! Keeping touch with your taxes and liabilities will make sure you don’t encounter any surprises and have a firm grasp on your expected tax liability throughout retirement.
One of the key considerations for expats and those considering retiring abroad is taxation. Different rules apply in different countries, different rates apply to different transactions, and these can depend on your residency status and how much time you intend to spend overseas and back in the UK.
Positioning the timing and order in which you tap into your retirement assets can be structured in such a way to make the best use of personal allowances and tax regulations and is a great way to maximise the value of your assets by not incurring unnecessary tax charges.
To understand how the taxes in your retirement destination work, how to navigate the financial world of dual-taxation and exemptions, and to access professional expertise to efficiently manage your tax exposure, appoint a wealth management consultant with local knowledge of the country who will be able to provide up to date, actionable advice.
Turbulent markets do occur from time to time and knowing how best to control your portfolio is key to making sure your relocation plans can move forward. Taking a considered approach and utilising expert support ensures you are avoiding risk and maximising the value of your assets to ensure a peaceful and well-budgeted retirement ahead.
Chase Buchanan is a highly regulated wealth management company, specialising in providing global finance solutions for those with a global lifestyle.