The Retirement Newsletter: The danger of the new and shiny
Issue Number: 16 — Is it a retirement risk, and how can we mitigate against it if it is?
Welcome
Welcome to issue 16, where this week, I look at the shiny and new and ask: Do they pose a danger in retirement?
The shiny and new
What do I mean by the shiny and new?
The phrase suggests a sense of freshness, newness, and attractiveness. It can refer to ideas, objects, and approaches to problems and life. The shiny and new can be fascinating and captivating, novel and exciting. And, being freshly retired, everything can feel shiny and new. Things are different. We view things differently.
The danger of the shiny and new in retirement is a real problem, and it feeds into two areas I have recently covered:
Issue Number: 15 — Procrastination and retirement— is it an issue?
Issue Number: 9 — Is retirement a long summer holiday? How do you plan to spend your retirement?
If you view retirement as a long summer holiday, the shiny and new can be a real distraction. If there are essential things that you should be doing, then the shiny and new can be a displacement activity — particularly if you don’t want to do those 'essential things'. The ’shiny and new’ has been a great displacement activity in my attempts to declutter.
In retirement, the risk of the shiny and new can be a serious problem, not only because of the impact it can have on how you spend your time but also because of the impact it can have on how you spend your money.
Risks of "Shiny and New" in Retirement
Please note: I am not a financial advisor. I am writing about what I have read over the years about money and retirement. This is not financial advice.
You retire and get a pension (and possibly a lump sum); the money is essential as it is what you must live on. Moreover, when you retire, you may be suddenly faced with investing a lump sum and using your pension in a way that makes the best of your retirement. And this is where the danger of the shiny and new comes in.
Investment Risks:
You need to invest your pension, and you should be aware of:
Volatility: New or trendy investments like cryptocurrencies or tech startups often come with high volatility and risk. While they can claim to offer large returns, they can also lead to significant losses.
Lack of Track Record: Investments may lack a long-term performance history, making it difficult to assess their reliability and potential for future growth.
Fraudulent Schemes: New investment opportunities or products can sometimes be fraudulent. Scammers promising high returns with little risk often target retirees.
The bottom line is that if it is too good to be true, it is.
There is an excellent site at https://www.fca.org.uk/consumers/pension-scams that can help in spotting such scams.
Make sure you do your due diligence. Retirees might invest without thorough research or understanding of the product in the excitement of something new.
Spending Risks:
Besides investment risks, there are other ‘new and shiny’ money risks you should be aware of:
Overspending: You suddenly have a large sum of money, and you are tempted to spend it on the latest gadgets, travel, or luxury items. We have all been there. You have some money and must have the newest camera or iPhone. It happens. What we need to do is budget and plan.
Lifestyle Inflation: As newly minted retirees, we try to maintain or improve our lifestyle with new purchases. These purchases may have a long-term impact on our savings, and the cost may go far beyond the initial purchase price.
Strategies to Mitigate Risks
So, how can we protect against the risks?
Investment Risks:
Diversification: We should diversify our investment portfolio (assuming we have one), balancing high-risk investments with more stable options.
Financial Advisor: Work with a financial advisor to ensure your investments and spending habits align with your long-term retirement goals. I am not a financial advisor, but the one piece of financial advice I will give you, and you should follow, is to speak to a financial advisor (and make sure they are registered and qualified to offer advice).
Due Diligence: Before making any investment, do thorough research. Understand the risks involved and how they fit into our retirement plans.
Scam SpottingStay informed about common scams and how to avoid them.
Spending Risks:
Budget: Running out of money can impact our retirement, so create a budget that accounts for spending on new items or experiences. Make sure spending doesn't jeopardise essential expenses. Make a budget and stick to it.
Do I really need that: Introduce a self-imposed cooling-off period on expensive non-essential purchases? Do you really need that new camera/car/boat/camper van, etc.?
Emergency Fund: Keep an emergency fund to cover unexpected expenses. This can prevent the need to dip into retirement savings for unforeseen costs. I had a three-month emergency fund in case I lost my job. I have now reframed that as an ‘unexpected expenditure’ fund.
So, in your retirement, beware of the shiny and new, as they can eat your time and your pension savings.
Please note: I am not a financial advisor. I am writing about what I have read over the years about money and retirement. This is not financial advice.
This week in the Retirement Hustle
This week, in The Retirement Side Hustle Newsletter, I discussed the structure of a video as part of my series of videos on YouTube.
The structure of a video is an interesting topic, and you will see various arguments online for different approaches and structures. In my video, I look at the most basic structure, discuss its importance, and explore how the structure can be used to hook viewers in by establishing open loops and knowledge gaps.
If you haven’t done so already, visit The Retirement Side Hustle Newsletter, subscribe for free and get a free copy of the newsletter.
Travel — Nostalgia Corner
This week, more from my time in Ho Chi Minh City (Saigon) and a sobering visit to the Bảo tàng Chứng tích Chiến tranh (War Remnants Museum):
Vietnam — Chùa XLợi (Xa Loi Pagoda), SThiện Chiếu, Ho Chi Minh City (Saigon), Vietnam — An historic Buddhist temple in Ho Chi Minh City
Vietnam — Ca Talk (Robitica Coffee), 49 NgThời Nhiệm Q3, Ho Chi Minh City (Saigon), Vietnam — Time for a coffee — they do make good coffee in Vietnam.
Vietnam — Bảo tàng Chứng tích Chiến tranh (War Remnants Museum), 28 Võ Văn Tần, Phường 6, Quận 3, Ho Chi Minh City (Saigon), Vietnam — A sobering experience.
Vietnam — ChBến Thành (Ben Thanh Market), LLợi (Bến Thành), Ho Chi Minh City (Saigon), Vietnam — I do like looking around markets.
Vietnam — Saigon Opera House, 7 Lam Son Square, Dist. 1, Ho Chi Minh City (Saigon), Vietnam — More French Colonial Architecture
Vietnam — Ho Chi Minh City People’s Committee Head Office (City Hall), 86 LThánh Tôn, phường Bến — And yet, more French Colonial Architecture
Next week, I finish my time in Vietnam.
Useful links
UK Government Website:
Next week
Next week, in issue 17, I will discuss decluttering, which is a chore for many newly retired people.
I have been battling decluttering (and cleaning) for over three months, during which time I have learned a lot and read a lot about the subject.
Thanks
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Until next time,
Nick
PS: If you want to contribute something to the newsletter — a story, advice, or anything else — please get in touch.
Please note: I am not a financial advisor. When I write about money and financial matters, I base my opinions on what I have read over the years about money and retirement preparation. IT IS NOT FINANCIAL ADVICE.