FTWeekend Digital Festival - 5 thoughts on retirement

As part of The FT Weekend Digital Festival Boring Money CEO Holly Mackay joined a panel of experts to discuss retirement and how to plan for the unknown.

Five thoughts from FT Weekend Live:

 

  • The recipe for a prosperous retirement hasn’t changed – despite all the turbulence in markets, and seemingly endless changes to retirement legislation, the basic rules for retirement saving don’t change: Start early, save little and often, and let compound interest do its thing. All three fellow panellists uniformly agreed on this simple point and for anyone questioning how this year’s events will impact on their retirement plan, they should anchor their thinking in these basic principles that still remain as true as ever.

 

  • The gender pension gap is likely to grow as a result of the pandemic. One recent estimate put the gender pension gap at 40% and this will only have become exacerbated by the pandemic, with women picking up more of the additional childcare burden of school closures and experiencing a more significant impact on their finances.

 

  • We need to talk risk as a good thing: Our research at Boring Money shows us that many people are putt off by the idea of investment ‘risk’. They associate it with scams, losing all their money or being ripped off. They right to be wary of these things, but it is critical to also see the upside – with risk comes reward. Managed correctly, investment risk is the path to retirement prosperity. The industry needs to focus on framing investment risk as a positive.

 

  • Lockdowns have shielded our savings…but: Normally household finances suffer a comparable economic hit when the economy take a plunge. Although many households will have suffered a loss of income, furlough measures have insulated many people. In fact, the savings ratio has skyrocketed as enforced hibernation means millions have been left with spare cash. Our latest research study found nearly a million new investors opened a DIY investing account in the UK last year as they took advantage of this spare income to get into the investing habit…but the narrative could change quickly this year as economies re-open. That spare cash will quickly find its way to coffee shops, cinemas and restaurants and businesses will feel that the withdrawal of state support sharply. There is work to be done to help lockdown’s fledgling investors to keep up the habit.

  • The ‘oldies’ need to lead by example – Older investors know from personal experience that contributing regularly and focusing on the long-term is crucial when you’re investing for retirement. They have the first-hand experience and have seen for themselves the real benefit this has. When you hit your 30s & 40s you begin to see the huge benefit of saving for retirement in your 20s. And by time you reach your 50s or 60s you really, really do look back fondly on that extra 1-2% of salary you set aside decades ago. You only really appreciate the benefits once you’ve experience the wonder of compound interest, so it is up to us to share this lesson with our children.

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