1. Think about how you will generate your income
A retirement portfolio is likely to feature cash, income-generating investments and growth investments. The exact balance will depend on how you want to produce your income – and what level of risk you want to take along the way.
You might focus on investments that naturally produce income (such as dividends from shares and interest payments from bonds) and then just withdraw this money, so your actual balance stays relatively consistent. However, this approach may not give you enough for your plans – and it means being comfortable with a varying income from month to month.
Alternatively, you could invest with a degree of growth in mind and then make withdrawals when you need them – either as occasional sums or on a regular basis. At this point, creating your portfolio is not that different to what you’ve already been doing to build up your savings. You just need to remember that you have a new goal – and, potentially, less ability to cope with significant falls in the value of your savings.
2. Don’t forget inflation
You might be tempted to avoid as much risk as possible, by putting all your savings in low-risk investments and then gradually making withdrawals over the years. If you have enough saved, you may be able to create a plan where this looks possible, but you need to take another type of risk into account.
Inflation will reduce the real value of any investment as the years go by. If the return is less than the rate of inflation, money invested in funds, bonds, gilts or shares will reduce in value.
So, assuming you want to keep your lifestyle broadly the same, you may need to withdraw larger amounts the further you go into retirement. Aiming for real growth potential alongside your lower-risk investments could help make this possible (though it’s not guaranteed).
3. How to get help when choosing where to invest
If you’re happy making your own decisions, you will need to decide how you want to invest your money - and getting some expert guidance is simple. At Fidelity we have a range of tools to help.
- Investment Pathways are based on four possible goals that someone may have for the money in their Pension Drawdown Account.
- With our Navigator tool, you just make a few straightforward decisions and it will then show you a single investment to consider based on those decisions. This investment will hold a selection of funds chosen and regularly monitored by our Multi Asset team.
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Select 50 shows you the funds experts feel have real potential for the long term. You just pick a category you’re interested in – there are eight to choose from – then research the funds you like the look of. It’s an easy way to put together your own drawdown portfolio.
- Our Investment Finder helps you search our full range of funds and shares, with an extensive selection of filters (such as geographical region, fund size and sector) that means you can turn thousands of options into your own personal shortlist.
Important information: this information and our guidance tools are not a personal recommendation for any particular product, service, or course of action. Pension and retirement planning can be complex, so if you are unsure about the suitability of a pension investment, retirement service or any action you need to take, please contact Fidelity’s retirement service on 0800 860 0048 or refer to an authorised financial adviser of your choice. You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals.
