Savings

Making your retirement savings last when markets are volatile

MoneyPlus Features Team

With the coronavirus causing volatility in financial markets, many people tell us they’re feeling anxious about the value of their retirement savings and are even rethinking their retirement plans. So how can you help make sure your money lasts?

Falls in markets are unavoidable – they’re part and parcel of investing – and it’s natural to be worried about the effect these will have on your retirement savings. But there are some things you can consider which could help your money last as long as you need it to.

When you take your money matters

Taking money from your retirement savings often involves taking out small amounts at regular intervals from your pension – a bit like paying yourself a salary.

But if you do this when markets are falling, that amount becomes a larger proportion of your overall pension pot. Think about it like taking the same size slice from a smaller pie.

 Markets negative return infographic
Once you’ve taken it out, you’ll have less money invested to potentially recover losses if and when markets (and your investments) rise again. And this might affect how long your money lasts.

Remember, the value of your investments can go down as well as up and you may get back less than was paid in.

Where you take money from can make a big difference

If you can - consider taking less from your pension and explore other savings or sources of income if you have them. While most customers think about their pension as the first stop for retirement income, using cash savings or Individual Savings Accounts (ISAs) can mean the value of your pension is invested for longer and has a greater chance to grow. This can make a big difference to how long your retirement income will last. 

In five minutes see how all your retirement savings, including your pension and State Pension, could combine to give you an income by using our free, handy retirement income report. 

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Check where you're invested and make sure it fits your long-term plans

Research suggests that the returns your investments make in the first few years after starting to take money from your pension could have the biggest impact on how long it’ll last.

So, if the value of your pension falls in the early years, it’s harder for investment growth to make up these losses in later years. That’s why it’s so important to regularly review your investments to make sure they’re doing what you expect.

Although changing your investments now, while markets are volatile, may mean that you lock in some losses, it’s still a good time to review your investments to make sure they remain right for you and your long-term plans.

If you don’t feel confident choosing the right investment option for you, one of our retirement advisers can help. 

Find out more about retirement advice

It's all about balance

It generally makes sense to have a good mix of investments that can help protect the money you need to take from your pension in the short term, while also giving the growth that can help the rest last for as long as you need it to. This usually means having a mix of lower and medium risk investments – but this may vary depending on your individual circumstances.

How Standard Life can help make your income last

We understand you may be feeling anxious about your retirement savings, so our Retirement Advice team is here to support and help you make the right choices for your future.   

When our clients Lesley and Jane spoke to one of our specialist retirement advisers, they’d seen the value of their pension fall dramatically.

Lesley said “Under the circumstances, we were both panicking. We’d seen quite severe reductions in our funds and it felt a bit like we were trying to lock the stable door after the horse had bolted”. The couple didn’t know if they could afford to retire as planned or what it meant for their income in retirement.

Jane and Lesley’s retirement adviser helped them consider all their sources of income, as well as how much they needed to live on. The couple have been reassured by an income plan that runs over the next 20-30 years, giving them confidence that they can still afford to retire now and that their investments are working for them.

Both are feeling positive about retirement, even with the market volatility that they’ve experienced. As a result, Lesley has been able to significantly reduce his hours and go part-time.

Want to hear more?

If you want answers to more of your big questions, then why not join us for our free webinar? You’ll get a chance to ask your burning questions to two of our retirement experts and hear about how we’ve helped more of our customers plan their ideal retirement.

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Client names have been changed to protect anonymity.

The value of investments can go down as well as up and it may be worth less than was paid in. Investment returns aren’t guaranteed.

You could run out of money depending on the level of withdrawals, investment performance or if you live longer than you expect.

The information here is based on our understanding in November 2020 and should not be regarded as financial advice.