Are you in the group of retirees in drawdown whose future lifestyles will be decimated by the coronavirus stock-market collapse?
Hopefully not, but you need to be very clear how your monthly withdrawals are being funded. If they are coming from cash or dividends you are fairly safe but if investments are being sold every month to provide your income it is a very serious state of affairs and you need to take action NOW!
The first thing is to be very clear about what is happening. Ask questions and don’t be satisfied until you totally understand what is going on. If funds are being sold to provide monthly income, and you have other cash which could replace that income, suspend withdrawals immediately.
I am not a regulated financial adviser and cannot give personal advice, but I can help you understand what is going on and how it is likely to affect your future lifestyle. Personally I would not use any drawdown adviser whose clients were funding income withdrawals from equity fund sales.
If you have a well thought out strategy which means that your fund can support withdrawals for at least three years from dividends and cash, without selling funds which have been decimated, I fully understand that it is still a worrying time for you but you do have time on your side and everything should work out ok. I hope so because that is exactly my position.
I am a great believer in having dividend income to support the bulk of my withdrawals. The question now is “will those dividends hold up?” Without a crystal ball who knows. My best guess is that there will be some dividend reductions but nothing like as severe as the stock-market capital falls.
If you are super cautious and can cut back your withdrawals a little it could put you ahead of the game and be a good strategy. If you can defer any significant items of expenditure for a while that would also be good.
I was a financial adviser for more than 30 years and this is one of the scariest times I have seen. However, stock-markets have always recovered and I see no reason why today should be different.
The problem is that if you are selling more and more funds every month to support your lifestyle, when the recovery comes you will have much less invested to benefit from that recovery.
Now is the time to pay attention and completely understand the strategies supporting your drawdown plan. When withdrawals were continuing, and the fund was increasing in value, it is not surprising that you did not give what was going on too much attention. With collapsing values, you really do need to pay attention, otherwise your lifestyle in the years ahead is seriously at risk.
If you would like some further guidance from me, Richard, just text or phone me on 07770 575122 and let’s have a chat.
As always, I must point out that I am not a regulated financial adviser and nothing I say should be treated as personal advice. However, if you would like to be sure your pension planning is on track my coaching and guidance service will give you the thinking processes to make good planning decisions for yourself particularly if you are happy to use one of the on-line platforms such as Hargreaves Lansdown or AJ Bell.
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