Time to start spending

You have spent decades diligently putting away money, always contributing to your work pension scheme, not spending all of your take home pay to keep your cost of living low. At times it was hard when there was a recession but you kept saving. Other times you saw others with a new car that you knew you couldn’t afford.

But after all those years, it has paid off. While those spenders are moaning about having to carry on working, you have a big pot of money and you can do what you want. For some, it is difficult to go from saving money to spending it.

Change of mindset

You are not entering a completely different stage of life. You are moving from the stage where you earned a regular income and where to saved to where you don’t have any regular income and where to spend. You are going from accumulating to deccumulating. This can be difficult for people who’s brains have become hardwired into save money for the future.

You have now reached that future!!

This is the time that you have saved all that money for. Saving it for the future is saving it for nursing home fees.

It is unlikely that people who have spent a lifetime saving money are going to change and start spending like there’s no tomorrow but it is time to spend it and it is OK for your savings to start going down in value as you spend it.

You don’t have to preserve your capital

A lot of retiree’s ask me what investment strategy they will need to earn the 4% deemed disposal amount and preserve the capital value of their ARF.

The 4% return on your €1m ARF will not work out at €40,000 a year, that’s not how investing works. When we look at an investment returns, we look at the long term average. There are lots of ups and downs that make up that average return. For example, the average return of the Managed Balanced fund over the last 10 years is 5.47%. Within those 10 years, we had a range of returns from -1.76% to +17.50%.

And there is nothing wrong with the capital value of your savings decreasing. This is what it is for. Yes, we don’t want it to disappear in the first few years but people who are prudent enough to save for their retirement are prudent enough when they start spending it too.

Having your money invested in strategy with some exposure to equities and having it risk adjusted (making withdrawals as a % of the fund so it goes up and down as the fund value does), should see your savings last.


If you have any questions, send me an email at steven@bluewaterfp.ie


Steven Barrett

21 September 2020