Are You Sitting on a Ticking Retirement Time Bomb?

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Are your retirement savings about to go up in smoke? The last few years of market volatility, rising inflation and poorly performing markets could have caused your retirement nest egg to shrink in value.

It is normal to panic and have sleepless nights over your shrinking pension. But before you do anything drastic, remember that pensions are long-term investments designed to ride out the ups and downs in the markets over time. If at any time you are feeling nervous about your financial portfolio and want a real-time analysis of your current financial services, consult with your financial advisor. 

How Has Inflation Affected Your Retirement Investments?

Inflation and rising rates could mean many future pensioners could earn less than they thought. Inflation is the rate at which your money loses value every year, meaning the prices of goods have increased, and you can buy less with your money. This applies to investments as well.

Example of the Effect of Inflation

If inflation is, for example, 4%, then your portfolio needs to earn at least 4% interest per annum to maintain its value or break even. Your portfolio needs to grow more than 4% to grow your money. If inflation is higher than your interest earned, you will lose money, and your capital will lose value.

Can You Afford to Retire? 

More and more professionals will answer no to this question. 

For many professionals close to retirement, the last few years could have shrunk their retirement capital.

When inflation stays high, it erodes the actual value of savings. The result is that the pension pots many future pensioners hope to live off have possibly shrunk. Therefore, they may need to set aside a larger percentage of their income for retirement savings. 

For those already retired, the rising cost of living can increase the risk of prematurely depleting a retirement nest egg.

How Can You Avoid Retirement Losses?

While you can’t predict markets and nothing in life is certain, you can against inflation, losses and risk as much as possible.

Retirement portfolios are planned over the long term to balance losses and bad returns. Usually, throughout the lifecycle of retirement investment, the composition would be high in stocks and equities, with a lower allocation to bonds and cash. This allows for maximum year-on-year growth of the capital. As the portfolio nears retirement, the compositions change to higher bonds and cash to preserve capital.

It is vital that you consult with your financial advisor to ensure your portfolio is designed according to your unique financial needs, provides good returns, and is tax efficient.

Risk profile

Your financial portfolio is designed according to the level of risk you are comfortable with, whether aggressive, balanced, or conservative. The higher the risk generally, the higher the potential returns. If you are a cautious investor, you might have to invest a more significant amount or monthly contributions to achieve the same growth results and total capital needed for retirement than if you invested more aggressively. Equity-rich investment portfolios pursue higher returns but also follow a higher risk of losses, which is why equities in your retirement portfolio are meant for the long term, where time can even out the fluctuations n the markets.


Over time, certain asset classes perform better than others, e.g. equities might perform better than bonds. This will change the risk weighting of your portfolio, meaning, for example, that if equities perform well, they offer more significant returns, and your portfolio will increase its equity percentage. The higher equity percentage might push you into a higher-risk category that you might not be comfortable with. Your financial advisor will rebalance your portfolio by selling off some equities and adding more bonds to rebalance your portfolio to the risk profile of your choice. They also use this time to analyse the funds, possibly eliminate poor-performing funds, and add funds that perform better or have the potential for higher returns.


Your financial advisor will diversify your funds to ensure that the risk of loss is lower. This is done by splitting the portfolio weighting between different asset classes, between different sectors, and between different economic regions. Basically, choosing fund assets that perform differently from each other, so when one performs poorly, the others are unaffected, or through negative correlation, perform better.

Review Your Retirement Portfolio

Your financial advisor will review your retirement portfolio and possibly rebalance it to ensure you are invested in suitable funds with the correct fund compositions according to your risk profile. This should deliver favourable returns and build and preserve your retirement capital.

Please note the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken as a result of reading the above.


Do you need guidance on your pension? Get in touch today to be put in contact with a UK pension specialist.

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