Help! I'm about to retire what should I do?

  • 24 July 2020
  • 10 mins
  • The present economic and financial turbulence greatly complicate the outlook for anyone planning to retire now

  • Do you step down anyway or stay in work and await a market recovery?

  • Professional financial advice could help you understand the options available to you and help you decide the best route forward

It’s pretty safe to say that these are disconcerting times for anyone contemplating retirement, given their hard-earned investments are likely to have suffered in recent months.

The global economy has been partly frozen by government responses to the coronavirus pandemic, with citizens locked down and many businesses shut. In the words of Kristalina Georgieva, managing director of the International Monetary Fund (IMF) in April 2020: “Governments around the world have deployed extraordinary policy measures to save lives and protect livelihoods in the worst economic downturn since the Great Depression. And given the gravity of this crisis, significant further efforts will be needed—especially during the recovery phase.”

Uncertainty remains high

On 7 May 2020 the Bank of England warned that we could be facing the worst recession since 1706.

Unsurprisingly, volatility has surged this year as investors swing between optimism and pessimism over the length and depth of the economic slowdown. A frequently used measure of market risk and investor sentiment is the Volatility Index of the Chicago Board Options Exchange (CBOE) or the VIX for short.

Also referred to as the Fear Index, the VIX uses pricing data from buy and sell options on the S&P 500 index to provide a guide to the likely scale of asset price moves during the next 30 days. The higher the index, the larger the swing.

According to the CBOE, the VIX stood at 12.47 on 2 January. As the coronavirus crisis took hold, it shot up to peak at 82.69 on 16 March. The good news is that it has since come down somewhat and has been between 25 and 37 since the middle of June.

To put all those numbers into perspective, according to Investopedia, the VIX has been somewhere between 18 and 35 for much of its history. This is illustrated in chart one, below, which also highlights the occasions when the VIX has been notably high.

These figures refer to the past and past performance is not a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and is not guaranteed, and you might not get back your initial investment.

Now, volatility is not always a bad thing. Volatility in itself has no direction: it only measures the rate of change. A price rise of 20% in one day would appear on a volatility chart as a large spike. If it were followed the next day by a price rise of just 1% this would be almost unnoticed on a volatility chart. On its own, volatility does not tell us if the 20% change was a good thing or a bad thing.

No movement means no changes in share prices – either up or down. Although it means no losses it also means no gains.

Are you risk on or risk off?

As Investopedia reminds us, at any time, the values of investments are driven by the balance of what is known as “risk on or risk off” opinions. Risk on favours higher risk-rated investments (like equities) and tends to happen when the outlook is clearer or generally more positive. Risk off (a general investor preference for lower-risk rated investments) usually happens when the outlook is either uncertain or negative.

Where you stand on the spectrum will help determine your response to your pending retirement.

Keeping a long-term view

We believe in long-term investing; that is, with a ten-year investment horizon. Keeping a long-term view allows us to filter out the short-term noise in markets and focus more clearly on our investment goals and objectives. If you decide to remain invested it should be at least for the next five years and preferably with a ten-year view in mind.

To demonstrate the benefit of taking a long-term view, we analysed the rolling ten-year returns on the FTSE All Share Index for every month between 31 March 1998 and 31 March 2010 (so the ten years from 31 March 1998 to 31 March 2008, through to the ten years from 31 March 2010 to 31 March 2020). This gives us 28110-year time periods.

Over all those time periods, the FTSE All Share provided a positive return on all but three occasions. The average return over all 281 observations was 140.7%.

These figures refer to the past and past performance is not a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and is not guaranteed, and you might not get back your initial investment.

What does that mean for me today?

Considering retirement in the midst of a financial crisis can be unnerving, and near-retirees may be rethinking their plans. The values of investments have fallen for much of the year and while they have shown short bursts of optimism the jury is still out on when a sustained recovery will arrive and what form it will take.

Read more: When will the economy recover?

There are two key elements in determining your investment approach: your appetite to risk and your time horizon (the amount of time you think you can stay invested). Generally, if you have a short time horizon and/or a concern about volatility, you should have a more cautious investment portfolio.

But at the same time it still needs to address your future needs as well as your immediate ones. Talking to a financial adviser on a regular basis is one way of making sure your investments remain appropriate to your life goals.

Another tool for coping with market ups and downs could be to make sure you hold enough cash to tide you over short-term periods of uncertainty. How much cash you need depends on your lifestyle but keeping three months’ spending to hand could be a start. And think about any big purchases you’re planning to make in the next five years. Having quick access to the money for that could also be a good idea.

So if you’re close to thinking about retirement – or even on the brink of retirement - the extent to which you are spooked by such price swings will depend, to a large extent, on your appetite for risk, whether you have a generally more optimistic or more pessimistic outlook, and how you’re currently invested.

  • Either bite the bullet and retire now, on the basis that you know what your savings are worth today and you can plan accordingly. After all, things could get even worse.

  • Or continue working, in the hope that better times lie ahead for investors. But things could still get worse.

But there is a third way.

Keep on keeping on

The days when employers could set a mandatory retirement date are long gone. According to the government’s website: “You can usually work for as long as you want to.” And more are doing so. In December 2019 the Guardian reported that those over 65 will account for half of all employment growth over the next ten years.

A compromise between heading into the sunset and staying at the grindstone into your late sixties and even beyond, could be to work part-time or set yourself up as a consultant. This could see you ease into retirement while leaving time for other interests and pursuits, and for family and friends, but still provide an income.

Read more: Are you ready to jack it all in?


The current experience highlights one key truth about preparing for retirement: The further ahead you plan, the better shape you are likely to be in if an unforeseen downturn like this happens again.

Ultimately, of course, it comes down to how much money you have saved and how much you are going to need. But before making a final decision, consulting a financial adviser could help clarify the here and now and provide a plan for the there and then. In the meantime, we have published a number of articles that could help you when planning or managing your retirement.

Read more: Have I saved enough to retire?

Read more: Tax-efficient tactics for retirement income

Read more: Help! What kind of lifestyle can I afford in retirement?

Read more: How your ISAs could rescue your retirement

You can find all these articles and more on the Wealth lens, the educational part of our website.

We also run webinars on various aspects of financial planning and investing, and you can learn more about these here. You can sign up for future events or watch podcasts of previous ones.

Important information

Any views expressed are our in-house views as at the time of publishing.

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In preparing this article we may have used third party sources which we believe to be true and accurate as at the date of writing. However, we can give no assurances or warranty regarding the accuracy, currency or applicability of any of the content in relation to specific situations and particular circumstances.

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