Immediately after the British had voted for Brexit in the June 2016 referendum, my knee-jerk reaction was to plan an article. Even many of those who’d voted Leave had expected the vote to go the other way. Whichever way you look at it, many of our assumptions of the last 40+ years are now out of date. We live in a world of uncertainty. Surely this would effect our retirement planning, I thought.
Actually I ended up taking around eight months to write this. I’ve read with interest what others have been writing. Of course many and varied opinions have been offered.
Where We Stand Now
As I write, Brexit still hasn’t formally started. This will require Article 50 of the Lisbon Treaty to be triggered. The government originally believed that it could trigger Article 50 without the consent of Parliament. However the courts ruled that Parliament must first give its consent. The process for this is underway, and many people assume that Parliament will grant its consent.
Interestingly, during the referendum campaign, David Cameron stated that in the event of a Leave vote, he would immediately trigger Article 50. He didn’t though, but had he done so, we might now be in a legal mess! But as things now stand, the process of Brexit looks set to commence in earnest very soon. One thing that we don’t yet have a clear view of is the outcome, of course.
Uncertainty In Markets And The Economy
Apart from an initial dip right after the vote, markets have proven to be highly resilient to the shock and uncertainty of Brexit. Most pundits predicted market turmoil, but this proved too pessimistic.
Most experts also predicted that the economy would take a sharp downturn. That too failed to happen. Opinion still remains divided as to whether Brexit will be to the long-term benefit to the UK economy or to its detriment. I’m not going to offer my own opinion on this. This is partly because I don’t feel qualified enough to do so. But mainly it’s because I really have no idea! Obviously I hope that Brexit will prove to be a bonanza for the UK economy, but hope is not the same as prediction.
What I do predict is that the future is unpredictable! I don’t mean that it’s impossible to sometimes guess right. I mean that it’s impossible to guess right all the time. However, it is possible to assess both the opportunities and the risks. Some of the opportunities are bound to materialise, but probably not all. So are some of the risks, but again, probably not all.
This is nothing new. It was the case before the Brexit vote, and it will be the case during the Brexit negotiations. No doubt it will still be the case after Brexit is complete in a couple of years time.
Don’t Stop Planning
Many people who are still in work feel that they’re in a quandary. Should they wait and see what happens over the next few years before making long-term financial plans? Many people continue with long‑term planning despite uncertainty, as delaying decisions can make future adjustments more challenging. Brexit has made absolutely no difference to the fact that we’re all growing older and will one day stop earning wages. Delaying retirement planning can reduce the time available to adjust to future financial needs.
What about other major world events, like the election of President Trump? The markets seem to be taking Trump in their stride. Many will have reacted by freezing like deer in headlights, fearing the world order is about to collapse. The fact is, there are always risks. Some may now be more apparent, others less so. There is no way of mitigating against a total Armageddon scenario. However, an approach to managing risk is to remain aware of it and consider how it might affect future plans.
Online Help With Planning For Uncertainty
EvolveMyRetirement® is a distinctive online financial calculator. It allows you to enter and save your current known financial information. It then uses this information to generate a strategy that aligns with your stated goals under the assumptions you provide.
The underlying assumptions are customisable. This means that if you think that current world events mean higher risk than the starting assumptions suggest, you can change them. It puts your tailored financial model through repeated Monte Carlo simulation, to ensure that it takes account of less likely events.
With EvolveMyRetirement®, the main purpose is to model a level of discretionary spending that appears sustainable under the assumptions used. The calculated amount will depend on your personal circumstances, and also on the underlying risk assumptions. The idea is to avoid over-spending or under-spending before retirement, and thus hit a cliff-edge at retirement. EvolveMyRetirement® is designed to model these interactions in a way that differs from traditional calculators.