Expert reveals tips on how to save for retirement
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The uncertainty of it all is what bring people fear, and this fear will have people “working much longer than you need to.” On his YouTube channel, James Shack, a financial planner discussed the “solution” to this uncertainty and suggested how people can best plan.
He said: “The solution is flexibility.
“Accept the fact that you will never be able to plan for anything and build flexibility in your plan to react to whatever life throws at you.
“Flexibility can help you achieve a much higher, sustainable retirement income than you would have ever thought possible.”
‘How much do I need to retire’ is one of the most searched questions on Google, Mr Shack said however the irony is that there is no answer.
He explained that it is impossible for people to know as they do not know what the future holds.
Life expectancy is increasing, and the markets are forever changing so certain plans may fail.
People need to “accept the fact they can’t plan for everything.”
Mr Shack went on to discuss how people can remain as flexible as possible in a way that can benefit them.
When talking about risk in the stock market he said: “If we increase the risk of our portfolio by upping our equity allocation, we are actually reducing the risk of running out of money.
“It may sound counter intuitive, but it is true.
“If you have high income needs you will need more growth to achieve them, but this only works if you put the right protections in place.”
Mr Shack urged Britons to not go and “crank up” their equity allocations without doing the proper research to ensure they are protected.
Mr Shack continued: “If your retirement savings are invested in the stock market you should not expect to take out the same level of income each year.
“You should expect to have to be tactical with the amount that you withdraw depending on what is happening in the market.
“If you don’t feel comfortable with this and you want the security of having a fixed income that never changes other than rising with inflation then you might be better off buying an annuity.”
An annuity provides people with a regular guaranteed income in retirement.
People can buy an annuity with some or all of their pension pot.
It pays income either for life or for an agreed number of years.
Mr Shack explained that recently the rates on these types of annuities can be as low as two percent which is why many people may be opting for higher returns on their investments in the stock market.
However, with investing, capital is at risk.
Mr Shack added: “Stock market returns are variable so you should expect to draw variable income.”
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