Case Study 1: The Case of ‘Too Much Risk’

John & Mary recently sold their business, having grafted hard for over 30 years. Now aged 60, with no children, their primary concern was to ensure a decent return on their capital. They felt they needed to achieve this level of return, particularly in the early years to ensure they’d have enough to live out their lives.

They had received some advice from two financial advisers who had discussed various investment scenarios. Each of the advisers had put forward their recommendations based on the ‘risk/reward’ profile they had identified for John and Mary.

To satisfy the requirement for a high return, both advisers had recommended a fairly adventurous investment portfolio. This was heavily weighted towards equities and other volatile asset classes.

Before choosing where to invest however, John and Mary were advised to speak with us here at Lifestyle Financial Planners by their accountant. After our initial free Discovery Meeting, we helped them identify the cost of their lifestyle over the remaining period of their lives, allowing for inflation and the cost of possible long term care. We also discussed and included certain financial goals and objectives that would make their retirement much more fulfilling and meaningful.

Using our state of the art Financial Planning Software and key financial modelling techniques, we came up with some surprising conclusions. We were able  to demonstrate that a return of just 0.5% over and above inflation would be sufficient to ensure they never ran out of money.

We helped John and Mary to understand their number. We helped them understand that there was absolutely no need for them to flirt with unnecessary risk. What they needed, in fact, was a lower return with more certainty – a tax efficient portfolio which would give them the peace of mind to enjoy their retirement without having to worry about the markets.

We saved them from years of unnecessary worry and the potential loss of capital they may have been exposed to had they invested in the higher risk portfolios previously been proposed to them. As they now understood their number, they were able to make shrewder and more informed financial decisions.

John and Mary continue to enjoy their retirement and we continue to meet with them on an annual basis to review their number. More often than not, our discussion involves how much more they can afford to spend to make the most of their carefree retirement.

It pays to know your number! Do you know yours, or would you like to?

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