Investing for the Grey Zone
25 January 2019
Before reaching their golden years, more people are entering what I refer to as the ‘Grey Zone’: a period of their life after the conventional retirement age when they are still working.
Work, save, retire. It used to be as straightforward as that. But the world has changed, and very few of us will now experience the traditional binary switch from working life to leisure time. Put simply, it’s now completely unrealistic to think of personal lifespans defined by a clear separation of work and retirement.
Instead, before they reach their golden years, more people are entering what I refer to as the ‘Grey Zone’: a period of their life after the conventional retirement age, currently ranging from anywhere between a person’s early 60s to their early 70s, when they are still working (either part- or full-time), have access to some of their savings, but are not fully drawing down on their assets, and in fact, could still be adding to their pension pot.
So what implications does the Grey Zone have for investing? Just as we can no longer expect to finish working life clutching a carriage clock and heading off into the sunset, it’s equally impractical to think merely in terms of the traditional accumulation and decumulation phases for our financial planning.
Grey Zoners in particular (but also those in the pre-retirement and retirement phases) will therefore benefit from two specific attributes from their investments. Firstly, an element of capital appreciation/preservation, but perhaps more importantly, also a level of sustainable income.
Crucially, having a sustainable income stream from their investments not only helps in the accumulation phase of pension-pot building (especially considering the compounding effect over time), but also gives people in the Grey Zone the flexibility to help fund their particular work-leisure lifestyle – depending on how much they need, or want, to supplement incomes from their employment.
Choice here is key. As the world of work and retirement changes, it’s important our investments can do the same.