This content is for information and educational purposes only. It should not be taken as financial advice or investment advice. To receive tailored, regulated financial advice regarding your affairs please consult us here at Hanson Financial Services (financial advice and planning in Liverpool).
Most of us know that saving and investing is a good idea – particularly for retirement. How these work exactly, however, varies across different stages of life. Of course, each specific person’s investment strategy is unique to their goals and needs. Yet, as an example, generally speaking the investment strategy of a young couple with a newborn baby is likely to differ significantly from someone in their 50s who is looking to retire in 15 years.
Why does this matter? Because your investment strategy has a huge impact on the growth and preservation of your wealth. Whether you plan to retire in 50 years or 5, it is important to make sure your strategy reflects your goals and apportioned time horizon. As financial planners here at Hanson Financial Services in Liverpool, we offer this short guide to illustrate how investment strategy can change over different life stages. We hope you find this helpful and invite you to get in touch to book a free consultation if you’d like to discuss your own strategy with us.
Investment strategy in your 20s
This is often the period where you start making investment decisions. Perhaps you open an ISA which allows you to invest in stocks and shares. Quite likely, your employer will sign you up to a workplace pension (auto enrolment) – which will, at least partly, be invested in the stock market. Saving for retirement may not seem a priority right now, yet with so much time on your side you have the chance to generate huge growth through compound interest. Quite likely, at this stage you can be more “aggressive” with your investment strategy, since you have more years ahead to recover from stock market falls – and then surpass them.
Investing in your 30s
By this point, hopefully you will have progressed a bit in your career and received a few raises. You may also now have a significant relationship (e.g. a spouse) and be looking to move up the property ladder. For the latter, it may be wise to consider a “lower-risk” investment strategy via a tax-efficient wrapper (e.g. a Lifetime ISA) to achieve your short term goal of building up a good deposit. You may also have a separate retirement investment strategy where you can still afford to be quite aggressive (given the longer horizon).
For many people, their 40s hold the pinnacle of their earning potential. It may also, however, be the point where your expenses are highest – particularly if you have moved into an expensive area, or your family has grown to 2 or 3 children (maybe more!). Here, your investment strategy may encompass multiple goals such as saving for retirement, saving for university for children, saving towards a second property (e.g. a Buy To Let) or building capital to put towards your first business venture. For retirement, this may be the time where you want to start “de-risking” your portfolio – given that it has less time to recover from stock market fluctuations.
By this stage of life, a number of your goals from earlier on may have been achieved. Perhaps your children have now left home and are financially independent. Maybe your mortgage has finally been paid off – allowing you to commit more savings towards your coming retirement, an extension or wedding costs (for your children). With – hopefully – a significant sum now stored up for retirement over the course of your career, many people now want to move towards a “wealth preservation” investment strategy. After all, you are likely to want to start drawing from these savings soon for an income, and you have far less time for your portfolio to recover from a stock market shock (should one occur).
Your 60s and further on
Many people retire in their 60s (or perhaps their 70s). As such, many financial planners refer to this period of life as the “decumulation stage” – i.e. converting your retirement portfolio into a regular flow of income and services. This may involve buying an annuity – a financial product guaranteeing a lifetime retirement income – which, in effect, removes any need to be concerned with an investment strategy. Alternatively, perhaps you choose to rely on “drawdown” to fund your lifestyle in retirement. In which case, your investment strategy still very much matters as this will affect the sustainability of your pension savings over 10, 20 or more years in retirement. For some people, this may involve moving more of their asset allocation into “lower risk” bonds (e.g. gilts). Others may be happy to keep a larger portion of their portfolio in equities – especially if they are happy to have fluctuating income over retirement, and have a higher risk tolerance.
Are you interested in talking to a financial adviser about your pension and investment planning needs? We’d love to assist you here at Hanson Hanson Financial Services.
Please contact us to arrange a consultation with our team – free and without obligation – to gain more clarity and peace of mind over your financial plan.
You can call us on:
Liverpool Office: 0151 708 7616
Manchester Office: 0161 401 0991
Chester Office: 01244 960 039Or email via: [email protected]