What types of investment should a retiring 70 year old person avoid?

27 January 2022

Question by Richard

Hi, what types of investment should a retiring 70 year old person avoid?

Answered by

Hi Richard

I understand that when you are looking at retiring there are many things that you have to think about. At the forefront of your mind, is often the thought that once you stop work you will have to live of what you have left. Given that none of us know how long we are going to live for, this can be difficult to quantify. So, naturally we start to think about appropriate investments, which will protect our money and potentially give us some income to top up anything from the State Pension.

Before you even start thinking about investment, it is a good idea to review your current situation and ensure you have some basic planning in place.

*Wills & Lasting Powers of Attorney's (LPAs)- It is important to have an up to date will in place, this will ensure that any wishes you have are carried out. It will also save loved ones unnecessary administration at a time they will be grieving. LPAs are a living will, they appoint a trusted people to look after your affairs. They can be made for both health and finance, I would suggest that you do both. It will ensure that should you be incapacitated then your wishes are carried out, without them your loved ones would have to apply to the office of the public guardian for deputyship. This is time consuming and very expensive. Wills & LPAs can be completed by yourself, but I would suggest using a professional if it is affordable. More information on LPAs is available here https://www.gov.uk/power-of-attorney

*Current Insurance Policies - do you have any life, income or critical illness polices? If you do, is there a need for them once you have retired. If not then it maybe worth reviewing them and deciding if it is necessary to continue to pay for them. If you are unsure check your bank statements for anything being paid to insurance companies, then contact the companies and ask for further details.

*Savings, Investments & Pensions - what have you got? where are they held? - to understand what you may need for the future, first you should reconcile what you have and where it is held. You may find you have old company pensions you have forgot about or an old account with cash you hadn't considered. A good resource to help you track your pensions is here https://www.gov.uk/find-pension-contact-details

*State Pension - I know you are 70, but you may have deferred your pension until you retire. Your state pension maybe a large proportion of your outgoing and mean that you aren't as reliant on other savings and investments. Also for those reading who aren't at state pension age, it is a good idea to get a pension forecast. This can be done here https://www.gov.uk/check-state-pension

*Debt - are there any outstanding debts that you need to pay off? Best to do this before making an investment.

*Lifestyle - what investment you make will be dependent on this. It is the most important factor to consider when looking at your finances. First, get an idea of your outgoing. Many of these are fixed, things like utilities, council tax and broadband, once you have these you need to think about how much you would spend on basic essentials like food and travel. Again you can get a good idea by looking at your bank statement, following this think about how any of these costs may change once you finish work. Then you should think about how you want to live in retirement, what would you like to do, where would you like to go and how would you like to spend your time, what are the costs of these things and when may you do them. Doing this will help you get an idea of what you want from retirement and also help you to get an idea on how much you may need.

Now you have taken some time out to consider these things, you are in a position to think about what to do with your investments. If for instance you think your state pension and any cash you have will last you, then there is little need to invest. If on the other hand you see a gap you may need to take on more risk with your investment. You must also consider that prices and lifestyle costs rise with inflation.

To answer the originally question, there is no investment that a 70 year old looking to retire should avoid. It should be about what you need and you should take into account your circumstances. That said, I believe you should invest in things that you understand, if you are uncomfortable with ups and downs in your investments then you may want to be more conservative.

If it is affordable, it is a good time to use a Financial Advisor/Planner that will provide you with a plan and help you understand how to map the cost of living against your assets. A good advisor will provide a plan of these things and help you action them.

I hope this helps, if you have any further questions then ask away.

Good luck and I hope you enjoy your retirement.