The final five years before retirement can bring a change in how people think about investing.

While building a pension often involves a long-term focus on growth, approaching retirement raises another concern: what happens if markets fall just before you need to start taking an income?

For Richmond residents, the answer is not necessarily to remove all investment risk. It is to understand which risks matter most to their plans.

Why timing matters

A market fall can be particularly difficult if you need to sell investments to fund spending at the same time.

This is sometimes called sequence-of-returns risk.

Two portfolios with similar long-term average returns can produce different retirement outcomes depending on when losses and withdrawals occur.

Does everyone need to become more cautious?

No single risk level suits everyone. Someone with a substantial guaranteed pension and cash savings may be able to tolerate more investment volatility than someone relying almost entirely on a defined contribution pension for day-to-day spending.

Your retirement date, spending plans, other assets, health and attitude to uncertainty all matter.

Think about when the money will be needed

One useful approach is to distinguish between money required for near-term spending and funds intended to support later years.

A cash reserve or lower-volatility assets may help cover some planned withdrawals, but holding too much cash can create inflation risk over a long retirement.

Investments can also fall in value, so diversification does not remove the possibility of loss.

Avoid decisions driven by headlines

A sudden market downturn shortly before retirement can tempt investors to sell everything.

Equally, a strong market may encourage taking risks that are no longer appropriate.

A documented retirement plan can help you assess whether your investment mix still matches your objectives, rather than reacting to each market movement.

Review the wider retirement picture

Investment risk is only one part of retirement planning.

Consider how much income you will need, which expenses are essential, whether you have guaranteed income, how inflation could affect spending and what flexibility you have if returns disappoint.

Reviewing pension charges, beneficiaries and withdrawal options can also be worthwhile.

Retirement planning in Richmond

Richmond Financial Advice helps people approaching retirement review their pensions, investments and income options in the context of their own circumstances.

Investments can fall as well as rise in value, and you may get back less than you invest. This article is for general information only and is not individual investment advice. Any investment or pension changes should reflect your circumstances, objectives and capacity for loss.

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