You are here: Home - Retirement - Retiring now - News -

‘Can I still retire in 2020?’

Written by:
If you’re nearing retirement, the recent market volatility might leave you feeling anxious. But your plans don't have to be totally abandoned, writes Matthew Lewis.

After more than ten years of a rising bull market, the first quarter of 2020 has been a rocky road for global stock markets.

By the time the World Health Organisation had declared the coronavirus outbreak a pandemic on the 11 March, the FTSE 100 had already fallen by 21% since the turn of the year and the S&P 500 just shy of 15%. Drops not seen since the financial crisis of 2007/08.

Markets have gradually been increasing since then. However, the recent volatility presents challenges if you’re close to retirement.

Here, Matthew Lewis, a chartered financial planner at EQ Investors, explains what you need to consider if you still want to retire this year.

Consider how much can you withdraw from your pension

Based on historical data, a safe withdrawal rate is typically around 3.5%-4%. This is for a well-balanced portfolio. The aim is to sustain an income for 30 years and prevent you running out of money.

If your expenditure is above 4%, this might be sustainable with a higher level of risk. However, it comes with additional warnings, especially through periods of market stress.

It can be a worrying time if you need your pension savings to meet living costs during a downturn. This can exacerbate losses since you are forced to sell assets at depressed levels to maintain the same income. This term is known as pound cost ravaging and can have a detrimental effect to the longevity of your portfolio.

Review your portfolio and consider alternatives

If you need to withdraw more than 4% of your portfolio, look at this as a short-term fix and make sure you review this regularly. If you can, consider other income sources during periods of volatility.

Some questions to ponder include:

  • Are you eligible to start drawing your State Pension? Will that relieve some pressure?
  • Do you have any other income sources? Such as:
    • rental income
    • defined benefit (final salary) pensions
    • continued ad-hoc work
  • Do you cash reserves to call upon in case of further market drops?

Drawing income

Your portfolio might well have a variety of different constituents. So drawing from the right pot, at the right time will be imperative to prevent any unexpected tax bills. Your investments might be held within a pension, a stocks & shares ISA, in cash or even an investment bond, all of which have different tax rules and methods of withdrawing.

Using a SIPP (self-invested personal pension) as an example. It is possible to draw down up to 25% of the value as a tax-free lump sum. There’s merit in this approach as you can draw on some funds and live from the proceeds while allowing the portfolio to rebuild over the coming years. However, if you can, it’s best to avoid selling assets at these lower prices. It might make more sense to draw down just enough to cover the next 12-24 months, leaving some of your tax-free cash invested to grow.

With the ongoing coronavirus uncertainty, being more flexible with how you draw on funds will be the sensible choice.

The changing face of retirement

Since the introduction of pension freedoms, there has been a massive change to retirement. We don’t see quite so many ‘sudden’ retirements as we used to. Stopping work on the Friday and being retired on a Monday has been replaced by a gradual retirement. Often in the form of a reduction in working days, possibly some form of consultancy or even a non-executive role.

Get advice

If you’re approaching retirement it pays to be prepared. The Money Advice Service has a retirement checklist on its website. Most financial planning firms will offer a free initial consultation to discuss your needs.


There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Ryanair in chargeback confusion

Ryanair staff have wrongly told customers chargeback is 'fraudulent activity' and could result in being blackl...
Ryanair in chargeback confusion

Grandparents doing virtual childcare can still claim NI credits

Grandparents caring for children aged under the age of 12 can still claim National Insurance credits for virtu...
Grandparents doing virtual childcare can still claim NI credits

New Covid-19 support package from Nationwide

Nationwide has guaranteed that none of the society’s mortgage-holders will lose their home due to coronavirus...
New Covid-19 support package from Nationwide

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week

  • More than one in 10 Brits have fallen victim to a #coronavirus-related #scam over the past two months, research sho…
  • "The government needs to support the removal of non-ACM cladding from buildings that are under 18 metres as well,"…
  • RT @DASLegalUK: The nation has turned to online shopping, but what are our retail rights if we face issues with delivery, faulty items, ret…

Privacy Preference Center





Read previous post:
New savings bond launched to help homeless during Covid 19 outbreak

Yorkshire Building Society has launched a fixed rate bond, enabling savers to help homeless young people through the coronavirus pandemic.