July 2024 marks the 55th anniversary of the Apollo 11 space mission in 1969, that fulfilled the pledge of President John F Kennedy eight years before to put a man on the moon before the end of the decade.
It was one of the cultural and technological touchpoints of the 20th century and necessitated rapid advances in technology that we are still benefiting from to this day.
Clearly, your retirement is hardly on the same scale as putting a man on another celestial body hundreds of thousands of miles away. But the journey to and, more importantly, back from the moon that Neil Armstrong and his colleagues made carries important lessons for your financial planning.
The complexity of the Apollo mission meant the need for immense planning
Watch any television programme about the Apollo 11 mission and it will no doubt feature three familiar pieces of film:
- The excitement of the raw power and brute force of the rocket-powered ascent.
- The historical moment when Neil Armstrong stepped on the moon for the first time.
- The triumphant ticker-tape parade along the streets of New York City.
But what about the part in-between the walk on the moon, and the celebrations of a safe return?
Getting three astronauts back safely to Earth was probably a greater achievement than firing them into space in the first place.
After all, there were no massive rockets to power the journey home as these were discarded on the way up. Then, there was the issue of dealing with the effect of zero gravity, and the mind-boggling complexity of returning into the atmosphere of Earth and landing safely at sea.
The Apollo 11 mission can act as a useful metaphor for planning your retirement. Getting up into space can be compared to your journey up to retirement when you are accumulating wealth.
The return journey, which in this case is your retirement itself, can be far more complicated. Furthermore, switching your mindset to start depleting your assets could be more difficult than you think.
Facing up to the challenge of moving from accumulating to spending
Much like the journey up into space, your accumulation phase is relatively straightforward. You will be setting aside part of your earnings to build your wealth and grow the value of your pension fund, and other savings.
However, this is followed by a period of decumulation, which can be far more complicated. Unless you have any other income sources, such as rental property, you are unlikely to have any more earnings, so will be living on the value of the assets you have accumulated and the growth you enjoy on your investments.
Furthermore, it can take a big psychological adjustment to go from accumulating wealth to no longer having an income and living on what you have built up.
So, you need to be sure you have an effective and robust plan in place to manage your assets, when you will not have the “rocket fuel” of any ongoing salary and regular contributions to your investment funds.
You need to understand the inherent risks of your retirement years
At the time, the Apollo space missions probably necessitated some of the most intricate plans committed to paper.
Not only that, but those plans would have been regularly reviewed in the run-up to the launch date, with NASA having a clear idea of what the potential risks were, and how they could be mitigated.
You need to look at your retirement plans in the same way.
One key risk is depleting your pension too quickly with the danger that you might run out of money in your later years. So, understanding how long your pension needs to provide an income is often essential.
On the other hand, you may end up not drawing enough to live a comfortable lifestyle because you are too over-cautious about making your fund last, as well as having half an eye on your financial legacy.
This could result in you prioritising the wealth you pass on to your beneficiaries above your own needs and comfort.
It is important to find the right balance between these two conflicting emotions.
Ensuring you have the correct investment strategy
You have read about your regular salary being the “rocket fuel” that will drive your accumulation of wealth during your working life.
After you retire, the growth you get on your investments will become increasingly important as the rocket fuel is no longer there.
The Apollo 11 project had several contingency plans built into the planning process in the event of any unforeseen events occurring on the return journey to Earth. In the same way, as you start decumulating your wealth, you will need to be conscious of the potential impact of a serious financial downturn, which could lead to investment losses.
You will need to have an idea of the required investment returns needed to maintain a level of income that will help you live comfortably throughout your retirement years.
Your retirement could last 20 years or more, so you will need an effective and flexible strategy that provides you with the right blend of investment risk alongside guaranteed income.
You will need to regularly review your plans
Once NASA plans were in place, they were reviewed and checked right up to take off.
They then used the findings from the successful journey to the moon to inform not only subsequent Apollo missions, but also a range of scientific research. Indeed, an American Museum of Natural History report confirms that moon rock specimens collected on that mission are still being analysed today.
In the same way, even if you have set out a long-term financial plan you are confident about, reviews throughout your retirement can be valuable.
For example, during your retirement, your wishes and circumstances might change. You may want to give money to your children to help them get on the housing ladder. Or, you may decide you want to travel extensively, or move to a different property yourself.
Regular reviews can provide you with the peace of mind that such financial challenges can be taken into account and your plan will remain robust enough to cope.
Each Apollo mission had to take into account external factors such as weather conditions and air temperature, too.
In the same way, certain economic issues that you have no control over, including high inflation or investment market turmoil, could affect your plans. These may result in you adjusting your income or your investment strategy. A financial review alongside an experienced professional could help you understand whether such changes are sustainable, and if they will still allow you to live the retirement you have worked hard for.
Get in touch
If you would like to talk about your retirement, or any other aspects of your financial planning, then please do get in touch with us at DBL Asset Management.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
