Retirement planning, like any other long-term successful survival strategy, is all about generating certain outcomes rather than going for spectacular one-off events.
In life, as in long-term financial planning, one can make sure of certain things and lock them into place thus providing a much greater chance of achieving realistically set targets.
The secret to all this is to ignore the outside noise and what others are doing, and focus on what is important to you.
By all predictions and accepted forecasts, two things will likely play-out and have a greatest impact on retirement living.
- Living standards and longevity of retirees will place enormous pressure on the projected capital and income required for both the individual and governments.
- Returns from all investment classes will be both more volatile and lower, in the foreseeable future. Whether we accept this gloomy scenario or not, we can all take certain actions in minimising the downside of such potential outcomes and to improve our control of the retirement planning process.
In using a football analogy; if we concentrate on the ‘One Percenters’ we can have a positive effect on controlling a total sum of significant outcomes.
Examples of these are as follows;
- By budgeting properly and making adjustments, each individual can make savings in their annual cash flow. This could easily be 1% of savings per annum.
- Restructuring or setting up your financial affairs independently of financial institutions can save 1% in fees per annum (often much more).
- Seeking out direct investments, such as bonds and mortgages rather than bank savings accounts, (or even knowing the best offerings from each bank), can easily add at least 1% per annum in returns.
- By holding your investments in the appropriate tax structure allowing you to achieve tax-effective outcomes may save you a further 1% per annum (and again, often much more).
There may be further savings or increased returns by increasing eligibility for government pensions and benefits as well.
Note that these stated projected savings are not based on increased risk or speculation, in fact quite to the contrary.
In our view, the biggest mistake one can make in managing ones financial affairs is to leave the required outcomes to chance (assumptions that the markets and other unknown factors will provide for your needs).
The periods of good market returns can lead to a reliance on the occasional good outcome more so by chance, rather than any sustainable effort.
By concentrating on what we can control, we remove this chance and are able to ensure that your financial plan is sustainable and realistic.