Press comment: Investors must be alert to risk in retirement even as life expectancy increases slow
If you are covering the latest ONS statistics on mortality, please see the following commentary from Quilter Investors head of investment, Anthony Gillham, who says that the figures should not distract from the need to manage longevity risk when investing in retirement:
“Although longevity increases have slowed, this needs to be seen in the context of a huge increase in life expectancy in recent decades. Individuals planning for later life still need to prepare their finances for a long and healthy retirement.
“A slowing rate of life expectancy increases could in fact ease pressure on retirees’ finances. But there really is no room for complacency and individuals that stay invested in retirement need to ensure their funds are invested carefully and with a long-term outlook.
“When in drawdown, volatility becomes a key risk for investors to manage. While building wealth during the ‘accumulation’ stage, investors might accept short-term volatility in the pursuit of greater returns in the long-term. While the normal ups and downs of the market present opportunities to buy assets you favour in accumulation, in decumulation investors are at risk of eroding their capital if they are forced to ‘sell the dip’ to generate income. Our research shows that someone invested in a portfolio that excels in the savings phase can rapidly run out of capital using the same investment strategy in later life.
“By investing to minimise downside risks in retirement, retirees can enjoy retirement flexibility and the benefits of remaining invested throughout their lifetime, but also guard their capital against the risk of drawing down too quickly.”