The perpetual struggle — saving for the future, whilst being able to live in the now. Getting financially on track so that we can save for retirement is of paramount importance, but there’s no point achieving success in the pension game only to look back and realise life has passed you by.
Why I love talking about pensions
Quite simply, I love talking about pensions because for a long time I didn’t have one. I joined the military straight from school and after twelve yeas flying rescue helicopters for the Royal Navy I left to fly them for the Coastguard. It was a great move in so many ways, but the big downside was my military pension is, well, probably good for looking after my coffee habit in retirement but not much more.
Thankfully, when I left the military I was able to start a workplace pension, and so got to work ensuring I was putting as much away as I could, and learning how to take charge of my own investments.
This can become quite an obsessive pursuit, and as it does — you start to realise just how important it is to plan for the future, and how crucial it is to ensure you have an understanding of that all important word — risk.
Retirement ages are going up, private pension contributions are struggling to keep up, and the Financial Times recently reported a worrying spike in private pension fund defecits.
UK private pensions deficit more than doubles
The shortfall of all UK private defined benefit (DB) schemes has jumped by £59bn in one month, to £107bn at the end of…
As a side note, over the next ten years or so we will see the biggest generational exit of the workforce as baby boomers retire, likely knocking on to long term productivity growth.
Anyway - I’ll get back on point — it seems more important than ever that we make sure we understand how we are placed for our own retirement, and as such I have become passionate about writing about it.
An unhealthy addiction to numbers
For someone who was terrible at maths at school I have a pretty bad addiction to numbers. It stems from wanting constant gratification my decisions are correct. After all, I’m just a private investor trying to make his way in the financial wilderness, I do not have years of professional experience to fall back on — and its this I think that trips a lot of people up, and convinces them not to manage their own investments. *
I tend to take it too far — I don’t just decide what my savings target is for the month, I’m constantly on compound interest calculators looking at what things might look like at retirement, assessing draw down risk and trying to figure out what I need to do to achieve certain targets.
This can have benefits — you figure out the detrimental effects of regularly moving in and out of investments and the damage fees can do to your portfolio.
You also realise that compound interest has most of it’s affect at the end of an investment’s life, highlighting the importance of not moving to lower yielding assets as you get closer to retirement, something which is controversial and if of course a matter for personal risk tolerance.
**That last bit is in bold because when I realised it’s affect it bowled me over.
This addiction to trying to plan out the future can pretty quickly become unhealthy, obviously you can’t control the future, all you can do is plan, and pretty generally at that. Obviously you need to act responsibly, but largely you need to understand your bet is exactly that, a bet to a large degree and there will always be an element of hoping for the best.
During the 2015 Oil Crisis I saw people who had saved forty years worth of company stock have it wiped out because of market conditions. It was a stark reminder of the vulnerability of any investment, of diversification (although this in itself is becoming harder and harder) and of the importance of not living your life solely to redeem a pension pot at the end of it.
At some point we need to get off the bus and realise we have done what we can, planned as much as is sensible, keep an eye on things and go about our lives.
A few years ago, when I was learning to trade US Treasury Futures I asked an experienced trader if I should spend some time learning a particular facet of the market, his advice stuck with me and pops into my head at various points when I find myself over planning — he said:
“You know enough, you just need to get on and trade”
What he meant was, spending too much time in the theoretical won’t help you. If you commit to this game of taking charge of your own investments, you need commit to your decisions, play your hand and get on with living your life.
One thing is certain — life will move forward, with or without you
Like most people who seemingly went to bed as a teenager and woke up in their mid thirties, I’ve realised life goes quickly, and you need to be present today. My daughter brings this home to me every day.
If you are head down focusing on the detail of a pension or investment plan every day, you are going to be preoccupied in your head. Look up, and remember that the whole idea of investments and pensions are so that you can improve the quality of your life, not stress about it during your younger years.
Another trap I see people fall into, and have to remind myself about a lot, is trying to not obsess too much about saving. Given that I wrote a piece about extreme frugalism recently that might see hypocritical, especially since I personally am shooting for 40% of my take home going to investments.
The point though, is that I’m comfortable with that number, I’m able to achieve it and still enjoy my life — and this comes down to lifestyle. If you have high lifestyle costs, this will be harder, if you are living a bit more of a minimalist lifestyle then it is of course easier.
What you don’t want to do, is try and scrimp and save every penny, obsess daily about where you have it invested, what the price of crypto is doing and forget to concentrate on taking the kids for a bike ride, or enjoying that walk on the beach, the upcoming holiday or simply a beer whilst you watch TV.
At the end of the day — investments and pensions are an important part of achieving financial independence and long term wealth, yes we should be working to look after them, yes we should know how they are structured, but we shouldn’t view them as the most important part of living our lives.
I’m talking to myself here too, this is a reminder to myself because I’m guilty of it more than anyone I know. So tonight I’m telling myself to remember to live life, because sooner or later we’ll be looking back wondering where it all went.