Oct 31, 2016 | Tony Byrne's View

pexels-photo-173286-largeA new couple came to see me this week, Jim and Maureen, after they had attended a pre-retirement seminar at which I gave a presentation on retirement planning.

Maureen wants to retire from her job in the health service early in 4 years’ time when she will be 55.  Her husband is already retired.  She is looking forward to receiving a good NHS pension but is aware that it will be reduced because she is going to take early retirement.

Jim and Maureen have been good with money.  They have an old-fashioned simple approach to money.  They spend less than they earn!  This is the secret to wealth.  Simple isn’t it?  Well, simple in theory but difficult to discipline yourself to do in practice.

As a result of their thrift their mortgage has been paid off and they have £150K in savings deposited with a number of banks and building societies.  That’s the good news.  The bad news is they are getting lousy returns on their cash of 1%-2% a year!

I demonstrated to them their lifetime cash flow plan using our Money Forecast System.  When they viewed it they realised they would be significantly better off if they could get their money working for them rather than the banks!

They consider themselves to be low risk investors but I advised them this attitude was costing them dearly.  They are lending money to the banks at very low interest rates and the banks are using their money to invest in “real assets” such as shares and commercial property to make a “real return” in excess of interest rates and inflation.  I advised them to stop depositing so much with the banks and to invest in these “real assets” themselves.  By the way a real asset is simply an in investment that can keep pace with or beat inflation.  You see if your money is earning interest at less than the rate of inflation like Jim and Maureen then your standard of living will continue to fall.

Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.

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