23 May 2025
As with most sports, archery requires skill, accuracy and preparation. You take into account the external and environmental factors like wind speed, humidity and the distance the arrow needs to travel to find its mark. With your eye keenly on the target, you aim your bow and release the arrow towards its goal. Rafiq Taylor, Head of Implemented Consulting at Glacier Invest, illustrates how planning your retirement income is surprisingly similar.
Getting started.
Preparing for your retirement starts, literally, decades before your 60th or 65th birthday, the age at which many companies, almost automatically, terminate your employment. Your retirement journey starts with the pot of retirement savings that you have accumulated either in your employer pension fund or retirement annuity or, ideally, in a combination of both. These savings, arguably, form the most important arrow in your quiver to sustain you financially during your retirement. The significance of the amount that you save cannot be over-stated. Also, consider the like your home that could be liquidated to ensure that you have an adequate sum available to ensure confident retirement income for the years after your last day at work.
Know your number.
If you were wondering how much you need to save, calculate this using your net replacement ratio (NRR) – the percentage of the current annual income in your last years of employment. Financial experts estimate that in order for you to maintain the lifestyle that you are able to have, the percentage is upwards of 75% per annum. Knowing your NRR and understanding the living costs that you will need to provide for when you retire, is a critical step.
What’s in your control and what’s not?
There are quite a few things to consider when you’re planning your retirement income – the external and environmental factors, if you will. They are, among others:
- How long you are likely to live (called longevity risk). It’s sensible to plan for living beyond the age of 80 – most people do nowadays. Unless you have a terminal illness, the possibility is high that you will live a long life, even with chronic conditions like diabetes.
- The market conditions that prevail at the time of your retirement (called market and volatility risks) and during the years that you will need to draw a retirement income (sequence risk). There will be good market cycles and not-so-good ones. Some of the investments that you make designed to pay you an income over your retirement, will be impacted by the markets, while others, less so. Your investment portfolio will need to combine solutions that benefit from up-market cycles and protect your capital in times of volatility.
- Know your risks and liabilities. While factors like your current debts (your mortgage bond, for example) might be settled by the time you retire, you need to consider other factors like increasing medical costs when you’re older, or that you might still have financial dependents.
- How much you plan to draw as an income is also a key consideration. It’s really simple; if the percentage that you withdraw is too high (known as your drawdown rate), your investment will decrease too quickly, and you will run out of money.
- Investing doesn’t stop when you retire, and you may not need to invest too conservatively. Capital protection is important to you, but growing your investment is also critical, which means taking on a acceptable levels of risk catering for income and inflationary considerations.
- Financial planning. It’s not sensible to make these critical financial decisions, that affect the rest of your life, without an appropriately authorised financial planner. They will design a holistic financial plan which takes into account your unique circumstances, risk tolerance and needs.
How the Glacier Invest Real Income Solutions can help
If generating a suitable, sustainable retirement income is your bull’s eye, then the Glacier Invest Real Income Solutions are the professional, intricately crafted bow, designed to help you meet your mark.
Many people choose to invest their retirement savings in a living annuity to provide them with an income during retirement. Living annuities allow your money to continue working while you have a well-earned rest. However, their link to financial markets also means that they come with certain risks. Financial markets are volatile, and severe market downturns can set back your retirement capital substantially.
The Glacier Invest Real Income Solutions help to control the environment and outcome.
Mitigating risks, protecting your capital and growing you’re investment, are three objectives of the Glacier Invest Real Income Solutions. The underlying funds and strategies in the Solutions are selected and designed with the following advantages in mind for the investor who has selected a living annuity:
- Actively managed portfolios to reduce longevity and sequence risks.
- Hedge funds behave independently to the movements in financial markets. Therefore, they provide a return that is less correlated to the rest of the portfolio.
- Smoothing techniques can reduce volatility and sequence risk in a living annuity portfolio. By holding back excess returns in good years and releasing them back to investors in years when markets perform poorly, the investor has a more stable return experience on a year-by-year basis.
- Alternative boost returns. A living annuity needs return boosters, and alternative deliver the after-inflation returns that retirees require to enable them to use as little capital as possible.
Just like the wind or humidity impact on your success in archery, many factors are beyond your control investing. The Glacier Invest Real Income Solutions take a holistic view of the environment affecting your retirement income target, implements cogent measures to mitigate the risks that impact on your investment and contributes confidently to ensuring that you meet your mark.
For further information on the Glacier Invest Real Income Solutions, read more.
