Like running the four-minute mile or travelling into space, climbing Mount Everest was one of mankind’s great challenges.
It took eight attempts for a team to reach the summit of the Himalayan peak, before Tenzing Norgay and Edmund Hillary finally succeeded. News of the expedition’s success reached London on the morning of the Queen’s coronation in June 1953.
Since then, it is estimated some 5,000 people have ascended Everest. In recent seasons, climbers have complained about the “traffic” on the mountain, with queues of people waiting to reach the summit.
Of course, Hillary and Norgay successfully descended Everest and lived to tell the tale. Sadly, however, many climbers perish on the mountain, with most of these deaths happening not on the climb, but on the way back down.
According to research from the British Medical Journal, there were 212 deaths on the Himalayan mountain between 1921 and 2006. Among the climbers who died after scaling more than 8,000 metres (26,246 feet), 56% died on their descent from Everest’s summit, while a further 17% died after turning back. Just 15% succumbed on the way up or before leaving their final camp.
So, what does all this have to do with your retirement?
During your working life, you make plans and save for your retirement. Let’s equate this – known as the “accumulation” stage – to climbing Everest.
You’ve probably paid into a company or private pension for decades, maximised your contributions, benefited from tax relief, invested into ISAs or other assets, to build up a nest egg for your later years. You may also have bought your home (and paid off the mortgage) and helped your children along the way.
Then, when you decide to retire, these assets must last you the rest of your life. As we live longer and longer, your accumulated resources might have to last you 20, 30 or even 40 years. They must enable you to maintain your lifestyle and pay for any later-life care you might need, as well as providing the legacy you want for your loved ones.
This “decumulation” stage – let’s equate this to descending from Everest’s peak – is often fraught with risk. It requires just as much planning and management as the climb if you want your mission to be a success.
Why the descent can be so dangerous
Kami Rita Sherpa knows a thing or two about climbing Mount Everest. He’s scaled the peak 24 times, more than anyone in history, and is not surprised that more people die on the descent than the ascent.
Sherpa told Business Insider that problems arise when people accidentally push past what their body can support. Some research suggests that Everest climbers develop a kind of “summit fever”, racing to the top to prove they can, even when their bodies are showing signs of giving out.
“When returning, their body is out of energy, and many people die due to this cause,” he said.
In many ways, saving for your retirement is the easy bit. Any financial adviser can tell you to maximise your pension and ISA contributions, ensure you pay your National Insurance contributions to benefit from the State Pension, and to organise your affairs tax-efficiently.
Coming down from the summit, though, needs discipline and careful planning. How much income should you draw and from what assets? How do you need mitigate tax?
Furthermore, there are a range of risks you’ll face as you start to draw on your lifetime savings:
- A significant fall in markets: what happens if you need to draw money during or immediately after a market fall?
- Volatility drag: a 10% fall in stock market values, followed by a 10% rise, doesn’t return your portfolio to where it started; it leaves you 1% behind overall. If the market falls by 10%, and you take a 5% withdrawal, you need the market to rise by 18% to return to the starting point
- Inflation risk: at an inflation rate of 2% per annum, £100 in today’s money will be worth the equivalent of £67 in 20 years’ time
- Longevity risk: according to the ONS, for a couple both aged 65 in 2018, half of couples would expect to see at least one spouse living to 93, a quarter will see one spouse living to 98, and one in ten will see one spouse living to 102.
Since Pension Freedoms widened the options available to people looking to retire, matters have become even more complex. Get it wrong and you could be hit with an unexpected tax bill or, worse, run out of money in retirement.
We can help you down the mountain safely
As experienced financial planners, we’re here to guide you safely back to base camp. Using tools such as lifetime cashflow planning, we can create and test strategies which will ensure you can live the life you want in retirement, without worrying about the abovementioned risks.
Just as the best climbers partner with a guide like Kami Rita Sherpa to achieve their goals, we’re here to help you to meet yours.