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Clarke Nicklin Financial Planning

'protecting your wealth and helping your investments grow'

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December 2016

Generation X are procrastinating when it comes to putting money aside for retirement

People with birth dates between 1964 and 1979 are labelled ‘Generation X’ and are suffering from a widespread tendency to procrastinate when it comes to putting money aside for retirement, according to the results of a new survey*.

Carried out by YouGov on behalf of Old Mutual Wealth, the research conducted with more than 3,000 adults shows that 90% have not started planning how they will fund their retirement*. Among that large majority, the average age at which people felt they would start planning was 45 – roughly 20 years before they might hope to retire.

Making up a savings gap

While there is strong evidence that most people recognise there is a need to plan, this group have a tendency to delay. But trying to make up a savings gap as you come closer to retirement age can be challenging. This is because you will lose some of the benefits of investing over time. For Generation X, retirement planning is on the ‘to-do’ list for most, but there is a worrying tendency to procrastinate and never get round to it.

Many people want to delay pension saving and leave it for another day. It is easy to see why. Between childcare costs, school fees, travel costs, holidays, repaying the mortgage and all the other costs we face in our 30s and 40s, it can feel that there is simply no money left to save at the end of the month. Instead, some people hope that tomorrow will be better and it will be possible to make up the difference. Unfortunately, that might not be possible for many, and trying to rapidly top-up your pension after years of under-saving is likely to end up more expensive over the long term.

Planning objectively for tomorrow

Planning ahead for retirement is not easy. It is difficult to plan objectively for tomorrow because we are hard-wired to focus on the here and now. Planning what financial resources you will need in the future is difficult, and plotting a path to reach your goals requires professional financial advice. Regardless of the life stage you have arrived at, it is important to receive expert and professional advice on your pension plans and requirements. To discuss your situation, please contact us.

Source data:

*All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3,009 adults. Fieldwork was undertaken from 14–22 July 2016.  The survey was carried out online. The figures have been weighted and are representative of all UK adults aged 30–45.

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

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How financially prepared are you for your future?

Thanks to healthier lifestyles and advances in medicine, people are living longer, but many are not financially prepared for retirement.

When it comes to setting your investment goals or strategy for your retirement, there are two main options. If you’re looking to build up the value of your investments over time, you’re investing for growth. Alternatively, if you’re aiming to get a regular income from your investments, then you’re investing for income.

Some investors think of cash as a safe haven in volatile times, or even as a source of income. But the ongoing era of ultra-low interest rates has depressed the return available on cash to near zero, leaving cash savings vulnerable to erosion by inflation over time. Cash left on the side-lines earns very little over the long run.

Eighth wonder of the world

Compound interest has been called the ‘eighth wonder of the world’. Its power is so great that even missing out on a few years of saving and growth can make an enormous difference to your eventual returns.

You can make even better use of the magic of compounding if you reinvest the income from your investments to grow the starting value even more each year. Over the long term, the difference between reinvesting the income from your investments and not doing so can be enormous.

The growth rate used is for illustrative purposes only and is not guaranteed, the actual rate of return achieved may be higher or lower.  You may get back less than the amount invested.

These investments do not include the same security of capital which is afforded with a deposit account.

The lesson is to not panic

The last ten years have been a volatile and tumultuous ride for investors, with natural disasters, geopolitical conflicts and a major financial crisis. It’s important to have a plan for when the going gets tough instead of reacting emotionally. The lesson is to not panic: more often than not, a stock market correction is an opportunity, not a reason to sell. Market timing can be a dangerous habit. Corrections are hard to time, and strong returns often follow the worst returns.

While markets can always have a bad day, week, month or even year, history suggests investors are much less likely to suffer losses over longer periods. Investors need to keep a long-term perspective. A diversified portfolio also provides a much smoother ride for investors than investing in just equities.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Navigating your investment options –

Few of us have the time or inclination to understand the vast number of different investment products available and consider what the best options are to suit our objectives.

Managing our ever-changing financial affair

It can be difficult to find the time to keep up to speed with everything, including managing our ever-changing financial affairs, especially as investment products are unlikely to remain the same throughout our lifetime.

Professional financial advice can help you design a custom investment portfolio to suit your individual situation. It should take into account your financial goals, as well as your need, willingness and ability to tolerate risk. It should also generally be designed to minimise your tax burden, if possible, and is prudent given your circumstances.

What’s your attitude to risk?

Investing, is as much about managing the potential downside as it is about targeting potential gains.

Generally, higher returns come with higher risk, and professional financial advice can help you think about your attitude to risk before making any recommendations. It’s also important to make sure your portfolio has the right balance for your risk profile by diversifying across asset classes, regions, providers and products as applicable.

To invest successfully, think about your long-term financial future. You are at the centre of your financial plan: your goals (both short term and long term), your situation, and your financial strengths and challenges.

As time passes and your lifestyle changes, it is important to keep a regular check on your investments. It is likely that the balance of the investments in your portfolio will need to evolve, not only in line with changing market conditions, but also with factors such as your investment goals, your personal circumstances and perhaps most notably your age.

Important considerations when building an investment portfolio:

Balance

Typically, investments with the potential for a higher return also carry a higher risk due to the more volatile sectors and regions that are targeted. Part of the process we consider is the risk or return trade-off, and we can help you to gauge your attitude to risk.

From this, we can ensure that your portfolio has the right balance of risk by diversifying across asset classes, regions, providers and products as appropriate.

Continual reviews

Over time, both markets and your lifestyle can change dramatically. Therefore it’s important to keep your investments under continual review to get the most out of them. Anything in your life, such as your age or personal situation, could affect the requirements you have for your investments.

Confidence

With markets constantly on the move and unforeseen events sometimes having significant impacts the need for ongoing adjustments to your investments can be extremely important.

Let an advisor take this important responsibility off your hands to help you to feel more confident that your holdings are suitably invested for your individual requirements.

Looking to invest for income or growth?

Creating and maintaining the right investment strategy plays a vital role in securing your financial future. Whether you are looking to invest for income or growth, we can provide the quality advice, comprehensive investment solutions and ongoing service to help you achieve your financial goals.

To discover how we can help you build a long-term strategy for your investments, please contact Kath on 0161 495 4700 katha@cnfp.co.uk – we look forward to hearing from you.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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