The year 2025 could offer the best retirement opportunities in a decade, according to wealth manager Quilter. Property prices have increased about 50 percent since 2015, while shares have more than doubled in value. Annuity rates, which provide a guaranteed retirement income, are at their highest since 2008.
Marcus Ellis from Quilter said that data suggests 2025 is a year in which some people may feel asset-rich due to significant increases in stock markets and property values over the past ten years. There is also a better outlook for annuities. Shares, which often make up the bulk of pension savings, have soared in value.
The MSCI World index of global companies is up 120 percent since 2015. If you had invested £1,000 a month for ten years into an MSCI World index fund, your £120,000 investment would have grown to £232,770. As a rule of thumb, withdrawing 4 percent a year from your pension pot and leaving the rest invested is considered a good target to make your money last and even grow.
However, inflation can erode the spending power of your pot over time.
financially optimal retirement timing
High share prices might be followed by a downturn, so reducing portfolio risk upon retirement is worth considering.
Craig Rickman from Interactive Investor suggests keeping two to three years of income in cash to cover times of poor returns. Annuity rates have risen due to a surge in borrowing costs. A 65-year-old with a £100,000 pot could buy an annuity offering about £7,400 a year for life – the highest rate in 17 years.
Helen Morrissey from Hargreaves Lansdown said now is a good time to buy an annuity for those seeking guaranteed income. The average UK house price was about £269,400 in November – up 42 percent from around £189,400 in November 2014. Equity release mortgages allow those 55 or older to borrow against their homes, with the loan repaid upon moving into care or passing away.
However, these loans can be expensive with debt accumulating quickly. Deciding when to retire is a substantial choice influenced by various financial factors. If you’re considering retirement, 2025 might be an optimal year, but consulting with advisers to manage risks and tailor a plan to your needs is always recommended.
