The Retirement Newsletter: Quarterly review
Issue Number: -68 — time for another look at my pension and retirement plans
Welcome
Welcome to issue -68 — a quarterly review. Yes, time for another one. (Is it me, or are they coming around more quickly?)
Like the photo? I took it in 2010 when I was lucky enough to spend some time exploring Yellowstone National Park on horseback — but that is a story for another day. Anyway, the photo has significance to what I am writing about this week. It sums things up.
Looking back
OK, first off, I want to say that I am not a financial advisor. I am writing about what I have read over the years about money and preparing to retire. This is not financial advice.
If you have been following along, you will know that I review how my plans to retire are going every quarter.
My last review was in Issue -81: Quarterly review at the end of quarter two of 2022.
I had previous reviews:
End of quarter 1 in 2022: Issue -94: Time for another review
End of quarter 4 in 2021: Issue -106: How is my retirement plan going?
End of quarter 3 in 2021: Issue -120: Time for a quarterly review
And, at the end of 2021 — Issue -106: How is my retirement plan going? — I thought things were going OK. Things were moving in the right direction. I concluded that:
“I have made progress. I have cleared my debts. I have increased the size of my pension pot due to some lucky investments and investing the money that had been servicing my debts.
I am saddened to reactivate the job list and disappointed that the 'life' list is moving backwards.
Here's to a successful 2022!”
How little did I know what the next nine months would bring and how things would change?
The end of quarter one — 2022
The end of quarter one of 2022 hinted that things weren’t going as well as I had hoped. As I said:
“Overall, there are now some concerns. All four areas are now active and a worry.
Money — the change in the National Insurance is good news if your pension is below £41,000 gross. The big problem is inflation, which will make a big dent in the level of lifestyle I will be able to afford.
Job — do I stay, or do I go? This is the least worrying area, and I can ride out the 94 weeks.
Health — time for a diet!
Life — the ‘Life’ list is the biggest problem, and it needs some work. Let’s see how the next three months go.”
Then on Thursday, 24 February, Russia invaded Ukraine. War in Europe.
Fuel and energy prices started to go up, and inflation reared its ugly head.
My investments were doing poorly, and my pension pots were shrinking. Admittedly, my worries are nothing compared to what the people of Ukraine are facing, but I was still worried.
I thought I would wait and see what quarter two would bring.
The end of quarter two — 2022
The subheading for my end of quarter two review was: I’m worried about my finances., and I was. As I said in summary:
Money — this is a worry. Soaring inflation and poor performance of my investments might delay my retirement.
Job — I will ride out the time until I retire. I may regret this decision if I have to postpone my retirement.
Health — time for a diet! Which is what I said last quarter.
Life — there has been some progress, but I need to do more.
I was worried, so I did a semi-quarter review in issue -75 — A semi-quarterly review — a quick look at my panic from issue -81. In my semi-quarter review, I focused on my pension pots and concluded:
My ISAs — at the moment, all I can do is reposition them to what may be less risky investments.
Private pension — I have no control over my private pension, and I will have to leave it to the ‘experts’ that I pay a lot of money to manage the scheme.
My savings — I will continue hunting for better deals to offset the damage caused by inflation.
Things were not looking good, and as I said:
“Bottom line — it looks like I will have to tough it out, which will hurt. Will I have to modify my retirement plans? Hopefully not, but I think it is too early to tell.”
The end of quarter three — 2022
Usually, at the end of the quarter review, I focus on four things:
Money
Job
Health
Life
However, at this time, all I can focus on is the money, but very quickly:
Job — I still have a huge problem with my work-life balance. I am still planning to ride out the next 68 weeks until I retire — if I can afford to retire.
Health — in the last review, I commented that it was time for a diet. I have made some progress, but there is a long way to go. Plus, I am still not right after catching COVID-19 back in July — see Issue Number: -79 — It got me! Catching COVID-19.
Life — no fundamental changes, and things still need working on.
So, let’s have a look at money.
Money
Now, this is the worry. From the semi-quarter review in issue -75:
My ISAs — I tried to reposition them but did not do enough.
Private pension — The experts seem to be doing OK.
My savings — I found some better deals, but they are still far behind the inflation rate.
So, I made some changes, but the cost of living in the UK is rising fast, and it looks like inflation will peak at around 15% (possibly higher) next year (2023). The cost of energy has doubled in the past year.
Currently, inflation is running around 10% (October 2022). This level of inflation is worrying, and it is hammering my savings. But there is nothing I can do about it.
My savings, particularly my Stocks and shares ISA, have taken a real pounding. The last six months have wiped out any gains I had made in the previous three years. I am now running at a loss — and this wasn’t helped by the ‘mini-budget’ in the UK on September 23rd, 2022.
The ‘mini-budget’ — the impact on savings and retirement
On Friday, 23rd September 2022, the Chancellor of the Exchequer — The Rt Hon Kwasi Kwarteng MP — held a ‘mini-budget’.
From what I understand, it was called a ‘mini-budget’ so that the Office for Budget Responsibility (OBR) didn’t have to ‘run the numbers’ to ensure the Chancellor’s maths added up. It appears the Chancellor may have a maths problem.
The key points of the budget for pensioners were:
Income tax cuts — scraping the 45% tax bracket for those earning over £150,000. This is unlikely to impact most pensioners.
Basic income tax cut — cutting the basic income tax rate from 20% to 19% in April 2023. This would mean more money for most pensioners.
National Insurance changes — scraping the planned 1.25 percentage point rise on 6 November 2022. Again, this could mean more money in the pocket of pensioners.
At the time, the budget was described as either brilliant or bonkers.
However, ‘the market’ had its say and went into a meltdown. Stocks, shares, and bonds plummeted. Billions were wiped off pensions. And the value of the pound tumbled. The drop in the pound’s value will drive up energy costs and increase inflation in the UK.
It looks like ‘the market’ thinks the ‘mini-budget’ was bonkers. Even the IMF — The International Monetary Fund — criticised the ‘mini-budget’ — IMF openly criticises UK government tax plans.
Last week, I said I would look at the impact of the ‘mini-budget’ on my retirement plans and the amount of money I would need to retire. Earlier in the week, I started to crunch the numbers and realised it was pointless as the assumptions I had to make about inflation, interest rates, and income were changing daily, if not by the hour. So, I abandoned the process.
I am at a loss as to what to do about my pension pots. I think this is a case of ‘wait and see’.
The photo
So, what does the photo at the start of the newsletter mean? Why did I pick it?
Well, that is how I feel about things at the moment.
I feel the waterfall represents my pension pots being poured away. Things are out of control. And I have just gone over a waterfall.
Depressing and worrying. And stressful.
I can only hope things pick up for the end of the year, but sadly, I don’t think they will.
Summary
Things are looking pretty grim.
A summary of the situation would be:
Job — I will ride out the next 68 weeks until I retire — if I can afford to retire. If I don’t retire in 68 weeks, the job situation may become a significant problem. Things cannot continue as they are — it is not doing my health any favours.
Health — keep working on the diet, get more exercise, and reduce my job-induced stress levels.
Life — keep working on it, but no doubt Christmas will have an impact.
Money — I feel that things are beyond my control, and this is adding to my stress levels. Not good. I will have to ride things out and see what the future brings.
So, there you have it. Things are not looking good. Let’s see what this next quarter brings.
Please note I am not a financial advisor. I am writing about what I have read over the years about money and preparing to retire. This is not financial advice.
Useful links
UK Government Website:
Next week
Next week in issue -68, I will look at gardening — hobby or side-hustle?
Thanks
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Until next time,
Nick
PS, If you have something you would like to contribute to the newsletter — a story, advice, anything — please get in touch.
Please note: I am not a financial advisor. I am writing about money and financial matters based on things I have read over the years about money and preparing to retire. THE ABOVE IS NOT FINANCIAL ADVICE.