In the second part of a three-part series, Mike Mulhern, wealth director at Westminster Asset Management, looks at the questions Islanders should be asking as they approach, enter or live through retirement
How should people think about investment objectives?
This is one of the most important parts of the planning process.
Before choosing investments or discussing withdrawal rates, you need to define what success looks like. Different clients have very different objectives.
Some want growth – to maximise the real value of their assets over time.
Some want to protect the real value of their wealth – in other words, to maintain purchasing power after inflation.
Some are comfortable spending down capital during retirement because they do not feel the need to leave a large estate.
Others have a specific target value in mind – for example, ensuring a meaningful sum passes to children, grandchildren or charities.
None of those objectives is right or wrong. But they require different investment approaches.
A client who wants to spend most of their capital during retirement should not
necessarily be invested in the same way as someone who wants to preserve wealth for
the next generation.
Similarly, a client who wants to maximise long-term growth must be comfortable with different risks and trade-offs from someone whose priority is capital stability.
Are legacy objectives becoming more important among affluent Jersey families?
Very much so. For many of our clients, retirement planning and legacy planning
are closely connected. They are not only asking: “Will I have enough?” They are asking “what can I do for my family?” and “how much can I safely pass on?”
That might mean helping children buy a home, supporting grandchildren’s education, making lifetime gifts or leaving money to charity.
Interestingly, clarity around legacy can also help clients enjoy their own retirement more.
Without a plan, some people become overly cautious. They worry about spending because they do not know what is affordable. Others spend too freely early on and risk compromising later-life security.
A good plan should help clients strike the balance between enjoying their wealth and preserving what matters for the future.
How does inflation change the retirement-planning conversation?
Mike Mulhern: Inflation is one of the most underestimated risks in retirement.
When you are working, your income may rise over time. In retirement, if your income is coming from pensions and investments, you need those assets to keep pace with rising costs.
Even moderate inflation can be very damaging over a long retirement. A lifestyle that costs £80,000 a year today may require a much larger income in 15 or 20 years simply to feel the same.
That is why we focus on real returns – returns after inflation and after fees.
Preserving pounds is not enough. The real challenge is preserving purchasing power.
Many people become more cautious as they approach retirement. Is that a problem?
It can be. It is completely understandable that people become more cautious as retirement approaches. They have spent decades building wealth and naturally want to protect it. But too much caution can create its own risk.
Holding excessive cash or investing only in very low-risk assets may feel safe, but if those assets fail to keep pace with inflation, the real value of the portfolio is gradually eroded.
The key is balance. Clients need enough stability to fund near-term spending, but also enough long-term growth potential to support later-life income and inflation protection.
Retirement can last 25 or 30 years. That is still a long investment horizon.
What changes when someone moves from saving to drawing income?
Everything changes. When you are accumulating wealth, market volatility can be uncomfortable, but it may also be an opportunity. If markets fall while you are still contributing, you are buying investments at lower prices.
When you retire and start withdrawing money, the dynamic changes. If markets fall early in retirement and you are drawing income at the same time, you may be forced to sell assets at depressed values. That can permanently damage the portfolio.
This is known as sequence-of-returns risk. It means the order in which returns occur matters. Two investors can achieve the same average return over 20 years but have very different outcomes depending on whether the bad years happen early or late in retirement.
That is why decumulation – turning savings into income – needs a different approach from accumulation.
How do you manage that risk in practice?
It starts with understanding the client’s spending needs, objectives and time horizon.
For some clients, it may make sense to hold a pool of more stable assets to cover near-term withdrawals, while keeping other parts of the portfolio invested for long-term growth.
Others may need a more income-focused portfolio, using assets such as bonds or dividend-paying equities. Some will need a strategy designed around capital preservation and legacy.
There is no universal answer. The right approach depends on the client. The important point is that withdrawals and investments cannot be considered separately. Your income plan and investment strategy must work together.
You mentioned behaviour earlier. How important is the emotional side of retirement planning?
It is hugely important. Retirement is not just a mathematical exercise. It is emotional. In strong markets, people can become overconfident. They may spend too much or take more risk than is sensible. In weak markets, fear can lead to panic-selling or unnecessary cutbacks in lifestyle.
Both reactions can be harmful.
A good adviser provides not only technical advice but also discipline. They help clients avoid knee-jerk decisions, review the plan calmly and make adjustments when needed rather than reacting emotionally to headlines.
Some clients also underspend because they are anxious about running out of money. That can be a shame. If someone has worked hard and can afford to enjoy
retirement, the plan should give them confidence to do so.
- Don’t miss part three in next Wednesday’s JEP Business. If you missed part one, read it now at jerseyeveningpost.com/business.
Important note
This article is for general information only and should not be interpreted as personal investment advice. The value of investments and the income from them can fall as well as rise, and investors may get back less than they invest. The suitability of any investment or financial planning strategy will depend on an individual’s circumstances and objectives.
Readers should seek professional advice before making financial decisions.
Westminster Asset Management is a trading name of Westminster Capital Limited.
Westminster Capital Limited is regulated by the Jersey Financial Services Commission.
About Westminster Asset Management
Westminster Asset Management is a Jersey-based independent wealth manager providing financial advice, discretionary investment management and custody/platform services through an integrated wealth management service.
The firm works with high-net-worth individuals, high-earning professionals, families, fiduciaries and retirees, helping clients align their investments with their personal objectives from sustainable retirement income and inflation protection to capital preservation, family support and legacy planning.
W: westminsteram.com
E: info@westminsteram.com
T: 01534 616818
