A brief summary of how ‘Accumulators’ might be impacted by the COVID-19 outbreak and opportunities to explore.
Last Updated: 24th April
The last few weeks have been a challenge for all of our clients and community. The challenge is not insurmountable, but it has raised particular challenges and opportunities which will vary depending on your stage of life. This Insight shares our ‘COVID Thinking’ for Accumulators.
Who counts as an ‘Accumulator’?
Age is useful a guide but it isn’t the deciding factor. We consider anyone who is building their savings, but is more than 3-5 years away from retirement. Typically this would be anyone up to age 55, but can often be older, or younger! Some professional sportspeople have a limited earnings period so need to accumulate their retirement savings before reaching age 28!
In this context, we see retirement as the point at which your income starts to be less than you spend. Some people may consider a reduction of working days from 5 to 3 the first step of retirement – and rightly so! If you are earning more in those 3 days than you’re spending, you’re technically still accumulating.
The next savings profile after being an ‘Accumulator’ is the ‘Retirement Approachers’, for whom retirement is on the near horizon.
We strongly encourage you to use the lockdown period to reflect on your current lifestyle and focus on making any changes to improve your future position. This period of enforced social isolation can sometimes be daunting… but it can also give you enough space to truly step back, and reconsider your priorities.
If you are an accumulator, you have hopefully been able to continue your work through the lockdown, in which case, you are very fortunate. Some accumulators have been unable to run their businesses or contribute to the business that they work for, so have been furloughed or made redundant.
Logging in to the boosst Portal to see that your pension pot and hard-earned savings have fallen in value (as investment values tumbled in March), can be heart-breaking. Hopefully our recent Insights helped you to keep the recent falls in context and remain calm. However it is not all bad news for those in the accumulation phase of life…
Falling markets mean that those building their investments can currently purchase global equities (shares in companies around the world) significantly cheaper than they could in February. In essence, investments being bought today appear to be good value, but this buyers opportunity is only available whilst markets remain lower than their previous levels. We don’t know how long this will be the case, and frankly, nobody does!
How can you take advantage of this?
You may be finding it tough to spend your income at the moment. Most accumulators we are speaking to that have been fortunate to maintain their household income are finding themselves with a large income surplus each month. Here are some ideas on how to take advantage of the unusual economic position we find ourselves in:
Invest a one-off sum: Feeling like you’re sat on more cash than you need? It may be worth speaking to your Financial Planner, to discuss whether you should retain a higher cash balance than usual, or if you could consider adding to your investments. It’s impossible to know if any particular moment in time is a good time to invest, until you have the benefit of hindsight… but what we do know for a fact, is that you can currently purchase the very same global equities, at lower prices than you could at the start of 2020.
Increase Monthly Investments: A combination of no holiday bookings, a non-existent bar tab at your local pub, sports events cancelled and time outdoors being limited, all mean that monthly expenditure is reduced. If you’re finding that you have surplus income at the end of each month, get in touch and we can help you to start, or increase, your monthly investments. Investing on a monthly basis is a brilliant habit, and helps to reduce the risk of market timing, as your monthly contributions are buying in to markets on a regular basis, rather than on any one day.
Take advantage of the sales!: To be clear, we do not advocate mindless consumption or spending. However, we do champion making the most of a good deal. We’ve noticed lots of retailers offering cut-prices, so if you were planning a one-off purchase later in the year, why not bring your purchase forward, if there is a good deal? Spending money now on a purchase you have planned for later in the year seems like a sensible investment to us, if it saves you money in the coming months. Clearly….succumbing to the itch to spend on items you have not planned for, remains a bad financial choice!
Rebalance your Portfolio: Over time, as some of your underlying investments rise or fall quicker than others, your investment grows slightly out of kilter. The process of rebalancing restores your portfolio back to its original allocations. After a market fall such as the one we have witnessed in March, you can find yourself holding less equities and more bonds than originally intended. By rebalancing, portfolios will sell bonds (which have broadly remained level in value) and purchase equities (which have fallen), which is a positive transaction. All boosst individual clients will receive a communication from boosst on May 1st regarding a portfolio rebalance.
Personal Development: The vast majority of accumulators are finding themselves with more free time during the lockdown. This provides the perfect opportunity for personal development. You could try a new language, or take advantage of Amazon and Audible’s free access to books and audio-books through lockdown. Or you could take on something a little more structured, like one of FutureLearn’s short courses, which are available at no cost.
Click here to return to our main ‘COVID-19 Thread’ and continue reading our latest thinking.
We thank you for the trust you have placed in us, and we hope you and your family remain healthy and safe.
Please be aware that the information we have shared in this Insight is for information purposes and is not individual advice. We make a conscious effort to check that all links to third party websites remain active and correct however we cannot take responsibility for their content or their availability.