Finances in retirement: Why regular health checks are just what the doctor ordered

Retirement isn’t just a walk in the park – when you reach the stage of life where you’re drawing your pension, you’ll be faced with a range of new challenges. Read on to find out why, therefore, prevention is better than cure.

Regular health checks can help identify early signs of health issues, meaning you’re able to monitor them before they become too serious. Certainly, the older we get, the more it makes sense to schedule them in, to give us some peace of mind.

The same can be said of your finances – and all the more so when you’ve taken retirement. Just as physical and mental health complications are more likely to occur as you age, your financial plans are no different.

Many people choose to remain invested in retirement, as it offers scope for opportunity. However, for a period that could last up to three decades or more, a certain amount of direction and decision-making is also required. Read on to find out why.

A risky business

Once you’re retired and have started to draw an income from your pension pot, you’re subject to a new set of risks – for example, sequencing risk and longevity risk – the effect of which often only becomes apparent once it’s too late.

It’s crucial to regularly review your investments to be able to recognise and minimise the impact of those risks, advises Danni Brotherston, Head of Advice Policy and Development at St. James’s Place Wealth Management.

“Ongoing advice is important before retirement, but arguably even more so in retirement – especially if you remain invested or you’re heavily reliant on other assets to provide an income.”

Force majeure

If you experience any changes in your personal circumstances and/or the macroeconomic environment, this can have a tangible knock-on effect on the likelihood of you meeting your goals. This should, therefore, prompt you to reassess your retirement plans to be sure you’re not unduly affected.

The current global pandemic is a topical example of one such impetus.

Significant market volatility has arisen from the coronavirus outbreak, raising concerns about whether retirees should revise the level of income they withdraw now markets are down, compared to pre-COVID-19 times.

“Markets have fallen during the crisis,” affirms Brotherston. “But a lot of people have also been spending less. So, there might be scope to take a reduced income from their portfolios to help offset some of the negative effects of volatility.”

The pandemic has likewise made many of us revisit our financial plans in other ways.

In a climate where redundancies are rife, some people may have been forced to consider retirement a little prematurely. Others are choosing to extend their working life, favouring a more gradual approach to retirement – while some have even returned to the workplace in a bid to boost their savings.

“You need to evaluate the impact all these types of events can have on your financial objectives and vulnerability – all the way through retirement,” Brotherston insists.

This includes everything such as gifting an inheritance, divorce and changes to your health. She adds that changed circumstances in retirement are often associated with health – and how life expectancy and expenditure can thereby be affected.

“Your health might deteriorate over time, particularly if you develop a condition,” Brotherston explains. “This can mean that a solution that was right for you early on in retirement may not be one that’s right later on.”

Divide and conquer

The majority of financial advisers will carry out a formal annual review with their clients, and further reviews can take place when needed, as circumstances dictate.

Regular financial ‘health checks’ at least once a year will refocus on your needs and goals, ensuring your investments still reflect your risk tolerance.

“Everyone has different priorities, and an adviser who really knows you can help you to make the right decisions – by adapting your strategy to your personal wants and needs,” Brotherston says.

“There are so many moving parts that it’s essential to regularly review them.”

If you feel that your financial health check is overdue and you’d welcome some support, get in touch with a member of the Wellesley team on 01444 244551 – our professional advisers are well placed to draw up a financial ‘prescription’ and give you regular doses of sound investment advice.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested.