“What if the market drops when we come to retirement?” This is one of the most common concerns people share as they approach the end of their working life. In this article, Chief Investment Officer, Declan King will discuss:
- Why retiring and accessing your pension are separate events
- Why drawdown timing matters
- The real risk to be aware of
- Why traditional lifestyle strategies fall short
By the end you will understand the key principles that support a confident transition into retirement even in uncertain markets.
Why retiring and accessing your pension are separate events
Retirement is a major life moment and people naturally want reassurance that their savings will support them. When markets fall at the same time it can feel unsettling. The fear usually comes from the assumption that everything changes the moment you stop working.
A helpful point to remember is that stopping work and drawing down your pension are two separate events. Many people bundle them together but they do not have to happen on the same date. Often, it makes sense to eat into some of your savings first when you stop working and delay drawing down your pension as long as possible to avail of the tax advantages your pension provides.
Why drawdown timing matters
If markets fall just as you plan to take your lump sum it can reduce the amount you expected to get. This is where having flexibility makes a real difference. If you have flexibility around the start of your drawdown, even by a short amount of time, you reduce the chance that a temporary drop in markets affects the value of your pot or the lump sum you receive. Sometimes moving the date up makes sense when markets are performing well or waiting a little to allow markets to settle.
This is not about reacting to headlines or trying to time the market. It is about having a plan that gives you options rather than being locked into a single date from a number of years out.
The real risk to be aware of
The biggest threat to a retirement plan is not a temporary market drop. The greater risk is longevity risk, which is the possibility of outliving your assets. Managing this risk means taking an appropriate level of investment risk throughout your journey. This can include periods where you increase your exposure to equities or scale it back, but these decisions should come from a carefully designed financial plan rather than emotional reactions to market swings.
“The goal is not to avoid every short term dip in markets. It is to build a robust retirement plan that allows you to stay the course and take advantage of long-term market performance.”
Why traditional lifestyle strategies fall short
A common belief is that you invest only until the day you retire. In reality your pension pot may need to support you for decades to come. The goal is not just reaching the retirement date but making sure your money keeps working for you throughout your life.
Many pension schemes still use lifestyle strategies that shift investments into cash as you approach retirement. While this may reduce short term ups and downs it can increase the risk of your money running out too soon. Moving too heavily into cash means losing the opportunity for long term growth that helps your pension last.
A strong retirement plan continues beyond your retirement date and balances the need for growth with sensible risk management.
Bringing it all together
Markets will rise and fall many times during your retirement. What matters most is having a plan that keeps you on track regardless of short-term fluctuations. With a well-structured strategy and a clear understanding of what you need from your pension pot, you can step into this next chapter with confidence and peace of mind.
At Metis Ireland we can assist you in building a retirement plan that is flexible and aligned with your long term goals.
If you would like to explore your own retirement strategy we invite you to contact us today.
Disclaimer
Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland.
All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.