Investing in Bonds, particularly in retirement (or once we stop working full time!) is the norm. If you are a member of an Occupational Pension scheme or you have a mass-market pension fund you are more than likely signed-up to LifeStyling on your scheme. We covered it in Blog 53. What LifeStyling will do is move a large chunk of your pension or investment portfolio from Equities and into Bonds as you approach your 'normal retirement age'. Can be a good thing, can be a not-so-good-thing.
This week I aim to share a short piece outlining the key aspects of Bonds, how they work, what you need to know about them if investing in them, and how they can stand to benefit/hinder investors in the mature stages of their financial planning. We will focus on Bond funds, and Bond Index Funds specifically in this weeks' edition.
Welcome, and thanks for checking out Informed Decisions Blog. Over the past couple of weeks we have focused on managing finances in later life. Last week we explored the 2 options many of us have when we get to draw our retirement funds, Annuity or ARF.
Seeing as it currently accounts for the majority of retirement income strategies it will form a large part of coming weeks. We will be exploring how one can attempt to maximise the income one gets from an ARF. Make sure you stay till the end because we will also be exploring how you can aim to ensure that your ARF lasts at least as long as you do - and hopefully longer, potentially leaving a sizeable legacy to loved-ones.
This week we will now share insights on some really important aspects of Approved Retirement Funds (ARFs). I was being a little cheeky calling this 'what you should know about ARFs' but I do honestly believe these are the basics. I also believe that knowing these fundamentals will help, whether you already have an ARF, or will have one in the future.
We will determine how ARF-income is taxed, how it is handled on death, and explore how you can maximise the income you get from your ARF. This latter element is an entire science on it's own however I will intro the main aspects to consider.
Should I buy an Annuity or Approved Retirement Fund (ARF)? Unless we are retiring from a defined benefit (DB) pension scheme we will have this decision to make in regards how to access our pension benefits. Once we take out tax free lump sum we will have this decision to make with the balance. It is a big decision with multiple complexities involved, both financial and emotional.
Do I want the predictable route or do I want the less predictable but potentially more lucrative route? Do I want the peace of mind knowing that I'll get €x every month for the rest of my days, or do I want the potential to get more every month and potentially leave a legacy? Do I want a piggy-back down Everest or do I want to navigate it on my own two feet? That last sentence might seem odd but bear with me. Before I outline the considerations I believe we should make before deciding on annuity or ARF, I want to put this decision in a little context.
I was speaking at a recent 'Point of Retirement' event in Croke Park. As part of my piece I compared managing one's income in retirement to climbing and descending Everest. I made the comparison that when we are in 'accumulation' phase of building and preparing for leaving full-time work we are on the 'ascent' of the mountain. We reach the peak at the time we depart full time employment - however as anyone who has ever climbed a mountain will confirm - the descent is far from easy. One stumble and it could be damaging or indeed fatal. This is a much lesser risk when we are ascending, a fall or stumble has a much lesser probability of significantly screwing-up our accumulation plan.
While some could argue it is slightly dramatic, I do believe that managing our income in retirement is very similar to ascending and then descending Everest. Given the potential dangers, the impact of a stumble financially, and the significant importance of staying on track draws many comparisons. One of the attendees at the session sent me a link that very night, which was breaking news of the Irish climber who had unfortunately gone missing on the descent of Everest, only for another Irish climber to be confirmed dead a week later, again on the descent. It was obviously a pure (and really awful) coincidence but it surely hammered home the point about the dangers of descending, or in this situation, of navigating our 'spending phase'.
Welcome back to Informed Decisions with me, Paddy Delaney!
A couple of weeks ago I mentioned that the coming 'season' would be focused on how to prepare for and importantly, navigate our incomes in retirement. It's not that I am breaking a promise but this week I want to take a very slight diversion from that, for two very valid reasons a) an article I wrote was published int he Sunday Times this week, and b) I didn't allow myself sufficient time this week to complete the next piece as fully as I had hoped.....so you'll have to wait till next week for that one I'm afraid! Sorry!
It is not everyday that someone like you and I gets a full article published in one of the main weekend papers - and for someone that has been an admirer of these papers, and of the people who write articles in them, it was a big deal! So I'd love to share the article with you, in the hope that it is of value.
Before I do that I have an ask of you. I have been blogging and podcasting (or 'casting pods' as my mate Lenny calls it!) for 3 years now. I absolutely love writing and creating the Blog every week, get tons of feedback and emails from people, and indeed some of you have become hugely valued clients who I work with on an on-going basis.
During the 3 years I have had a strong desire to do more, to reach out and connect personally, to perhaps meet as part of a group or community of sorts. In my mind at least there is nothing more rewarding than spending time with people who are interested in similar things and sharing ideas, forming new relationships, and learning from each other.
With that in mind, if you are reading this in June or July of 2019, I would really love your thoughts on the following:
If I were to host a Personal Finance/Investing/Retirement conference, meeting or Webinar, would you be interested in attending? If so, have you any suggestions on the specific topics or aspects you feel would be of most value and importance to you?
I have some ideas on what I feel would be of value to people, and based on my own years as a facilitator and coach feel would be able to bring something of real value - the question in my mind however, would there be anyone else there apart from me!? So who better to ask than you, my supporters. Would love you thoughts, email me here with your thoughts.
Pause me, reflect on this, would you attend, and what topics or format would be of value to you? Let me know either way! Once you've that done have a read of the following Sunday Times article as of 2nd June 2019.
The Generation Game… click here to read full article.