I have enjoyed Bec Wilson’s writing in the Times, this one particularly. You can read the original on this link. It is pointed at a certain type of person, a kind of person who reads the Times and there’s nothing wrong with them!

You can read the original here.

The way savers in Britain approach retirement saving is quite different from what I see in Australia and it fascinates me. The UK, to generalise, spends a lot of time talking about how to protect people from financial risks and decision-making, and rather less time exploring what they might gain by being more adventurous.

I wonder whether the cautious have quite caught up with the reality of how long we all might live — or at least those in their forties, fifties and sixties who could be heading towards a 30 or even 40-year retirement. Might this be an opportunity to nudge you into taking a little more risk, where you can afford to, for a little more reward in retirement?

A lot of the conversation is about protecting savers from the risk of running out of money in retirement, securing a guaranteed income for life and keeping savings safe. All perfectly sensible, but are you spending so much time worrying about what could go wrong that you’re overlooking some of the things that could go right?

I’m not just talking about investment returns. I’m talking about the choices that money can give you.

What if keeping all your savings in cash means that inflation gradually eats away at what they can buy? What if working another three years gives you a bigger pension but costs you three years of freedom that you could already afford? Or what if you’re so worried about making your money last well into your nineties that you don’t spend enough of it enjoying your sixties and seventies?

These are retirement risks too, and they are worth taking seriously. Here are four simple ways to think differently about risk. They might make a huge difference to your retirement.

Consider a bucket strategy

As retirement approaches, most want to protect the pension savings they have spent decades building up. Moving money into cash or lower risk investments can feel deeply reassuring, especially when you are no longer earning. But if you’re retiring at 65, and you might live to 95, some of your money could have 30 years to work harder for you.

One approach worth understanding is the bucket strategy. Keep money you will need in the next two or three years in cash or lower risk investments (bucket one), and allocate some that you will need later to income investments (bucket two) and longer-term money to growth assets (bucket three).

It means you still have the exposure to investment markets, but reduce the need to sell shares every time you need to pay a bill or draw income, which can be particularly bad ifyou have to do it in the middle of a market downturn.

The bucket strategy doesn’t remove the market risk, and the buckets need managing, but this approach can help to balance short-term security with long-term opportunity.

Just guarantee what you need

There’s a lot to like about having guaranteed income for life. Knowing that money will arrive every month, regardless of what the financial markets do can make retirement a lot less stressful. But you may not need every pound of your retirement income to be guaranteed.

A useful starting point is to work out what your essential monthly expenses are: your energy bills, groceries, council tax and everyday lifestyle expenses. Then calculate the amount of guaranteed income you need over and above the state pension and any other guaranteed pension income you have coming in and work out what other income you will need to cover the basics.

Remember, however, that guaranteed income comes at a cost. If you buy an annuity, for example, you will be handing over a lump sum in exchange for the security of regular payments, usually for life, but you can adjust the terms.

The choice isn’t really between guaranteeing everything and guaranteeing nothing. Combining the two could give you more freedom in your retirement years.

Decide what those extra years are worth to you

I meet a lot of people who tell me they’re planning to work two or three extra years to make their retirement more financially secure. And sometimes they do need to. But I often wonder how many have actually calculated what those extra years will actually give them.

Working longer can mean more pension contributions, more investment growth, and fewer years of spending your savings. But it also means fewer of your healthiest years spent free of work — and you can’t get that back at 80 when you realise it.

So here’s a good exercise worth doing. Calculate what your retirement income might look like if you stopped working at 63, 65 or 67. Then work out how much difference those extra years would actually make to the type of lifestyle you can afford. Then, you can decide if it’s worth waiting for. You might find that the three years will make a big difference. Or you might find you could comfortably afford to retire earlier, particularly if you are prepared to adjust your spending or work part time.

Never forget that your sixties can be some of your healthiest and most active and fulfilling retirement years. Put a value on that too.

Give yourself permission to spend

This is one of the most interesting things I see in retirement. People spend 30 or 40 years diligently saving into their pensions and feel pleased with themselves for being sensible with money. Then retirement arrives and they find it really difficult to start spending.

Of course, a lot of people do need to be careful with every pound. But others who have accumulated enough to enjoy a comfortable retirement still worry constantly about whether they can afford to spend.

It’s useful to work out how much income you need to cover your cost of living and big one-off costs, and pay yourself a sensible amount each month to cover this. Then work out a budget for your epic retirement experiences.

You could make it an annual number for the first 10-15 years of retirement, or you could make it a lump sum that you invest based on when the money will be needed and chip away at it over your best years.

Focus on how you want to use it. It could be travelling more in your years of good health, helping your kids buy a home or funding an adventure you’ve always wanted to take. The important thing is to make those decisions with an understanding of how they will affect your longer-term finances rather than being too frightened to touch your savings.

While there are risks everywhere in retirement, being sensible with money does not mean avoiding all of them. It means understanding which risks you can afford to take.

Maybe that’s the conversation we need to have more often in the UK when we’re talking about retirement. What’s the point in spending decades building financial freedom if you’re too frightened to use it?

Bec Wilson is a podcaster and the author of How to Have an Epic Retirement