In the last couple of posts, we spent some time getting current with all our amassed pension plans investments bank accounts and insurance policies. Next, we need to decide what we are actually going to do with all that information.
Hopefully you feel more financially organised after everything we looked at in earlier in this series than you ever have done in the past. Of course for many of you, the processes discussed are second nature to you already.
Ideally, you will have a one-page summary of where all your money is currently held, with information about the charging structure and investment approach in each plan. Now we need to start moving our pieces into the right places so we can begin our retirement in a good strategic position.
We Shouldn’t Move Money for the Sake of it
I often talk about simplicity, flexibility and cost when it comes to optimising your pensions and investments. I think it is important right at the start to establish that there must always be a clear reason for moving money around different plans. There should ALWAYS be a benefit to you in doing so.
That benefit might come in the form of greater investment choice, reduced costs or added convenience – all these are legitimate reasons for moving money. I think that a general rule of thumb should be that the money should stay where it is unless a clear benefit to moving can be identified.
If you are the kind of person who is into FIRE (financial independence retire early), then chances are you already have a super low-cost flexible investment or pension plan which will serve your needs adequately. But most of us suffer from inertia when it comes to dealing with our financial plans, which is why we often build up so many different pots over time.
It is also important to understand that there is often no such thing as the ‘best’ place for your money. More likely there will be many possible ‘great’ places for it and choosing one over another won't make much difference in the grand scheme of things. So be careful not to overthink.
We’re Aiming for Simplicity and Flexibility
We are aiming for simplicity because we are going to have lots to think about in the run-in to retirement, and at the point at which we decide to start drawing down our money rather than saving it, we’ll have lots of decisions to make. We don't need this process complicating any more than is necessary by hanging onto dodgy old plans which no longer serve the purpose for which they were started.
We want our plans to be as flexible as possible because of the ever-changing nature of retirement. We are quite likely to need access to money on an ad hoc, as well as a regular, basis once we do start drawing down. The last thing we need is to find that our money is held in a place where we can't exercise that kind of flexibility.
So, when considering potential new homes for our money we must ask ourselves whether it offers a simple and flexible place for us to hold our hard-won cash compared with where it is held currently.
You Don’t Need to do This all at Once
Really importantly, give yourself permission to do this whole process over a period of weeks if not months. People pay advisers like me to do this thinking for them, and also the implementation. After all, chances are there are about 400 million things that you would prefer to be doing – that's why I have a job! Unless you are planning to retire next week, chances are you have time to do this slowly. Better done right than done quickly, after all.
Miss the previous post? Or ready for the next one?
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