Dealing with reduced investment income

Tips for dealing with reduced investment income in retirement:

• Take stock
  Make a budget for the year ahead, based on reduced income from investments. If money is tight, is there any way you can reduce your spending or find income from other sources? (e.g part-time work). Use our Budget calculator.
• Review your goals
  Now might be the time to reassess some of your short-term goals. Are they still realistic? Use the My Goals worksheet.
• Prepare for the unexpected
  In these uncertain times it’s especially important to have an emergency fund – some money you can get hold of in a hurry. Do you have a portion of your nest egg in an account you can access quickly if you need it in an emergency?
• Know what you’re getting into
  If you are thinking of putting money into something that offers higher returns than a bank deposit, make sure you understand what you’re investing in and who you’re investing with. Check the institution’s credit rating and follow our 8 rules for Sorted investing.
• Understand the risk
  All investments carry some risk. The right option for you depends on how much risk you are comfortable with, what returns you want to make, how long you want to invest for, and how easily you need to be able to access your money. Try Sorted’s Risk recommender and Investment recommender.
• Understand the guarantee
  If an investment is covered by the government’s Retail Deposit Guarantee Scheme, remember that your funds are only guaranteed up to 12 October 2010. You can find a list of institutions covered by the guarantee on the Treasury website.
• Don’t lose sleep
  As a rule of thumb, the more dependent you are on your nest egg, the more conservative your investment approach should be. However, even if you don't rely on this money, you still need to be able to sleep at night. And the 'price' you pay for extra security may have to be accepting a lower return.

To find out more about managing your money in retirement, visit our 60plus section. Or order our free booklet “Your money in retirement".

Published 11 March 2009