Whenever I talk to someone on Zoom about their
retirement, I tend to categorise them into one
of three buckets. Paralysed, pragmatic or panicked.
Let me take you through a couple of typical examples.
You'll see what I mean. Waiting 10 years for
a 7 % market return. It's not going to change
my life. I need something that can move the needle
now. listen to what he's saying he's referring
to a seven percent return on investments over
10 years now this is something that is commonly
quoted as being achievable if over the 10 years
inflation stays below four percent you gained
a pretty good growth in your money what this
panic retiree is saying is that that weight is
too long and the return is too small so what's
he going to do instead he's going to find himself
a tech stock that has recently performing around
20 per year but the catch is past performance
is not an indicator of future returns he could
end up losing a large proportion of his pension
pot he already thinks is too small his panic
is causing him to make rash decisions He needs
to take a breath. Okay, on to the next clip.
My money's safe. It's in my savings account.
I know exactly where it is and I can get to it
when I need it. I'm going to put this guy immediately
into the paralyzed bucket. He has his money in
an instant access savings account. This will
be paying about 2 .4%. And with interest rates
above three, it means his money is eroding. his
purchasing power is dropping or put more simply
he's losing money every single year so why have
I put him in this category well he's forced into
inaction by this paralysis of fear that if he
invests his pension pot that he may not be able
to get his hands on it and he feels that it's
distant somehow rather than in like a local building
society where you can go and see the cashier
and check that his money is safe okay on to the
next clip i don't care about growth i just don't
want to lose the money i've been saving up for
all my life again this person goes into the paralyzed
bucket do you agree he says he doesn't care about
growth yet when it comes to pensions growth pretty
much is everything that 10 pounds you put into
your pension one week in 1979, it would have
bought you about 40 pints of beer. Enough booze
for like a whole month. Now you'd actually be
embarrassed asking for change from a single pint
in some part of the UK. Your pension has to earn
more than inflation or you'll never be able to
retire. Putting your pension money into a savings
account isn't safe. It's the opposite. It'll
disappear over time. Let's take a breath here
then. Why do I think it's important to make a
video like this? Well, I'm hoping that you're
starting to think which bucket you would put
yourself in. And if you don't think this is the
correct bucket for you, what do you need to change
to make your way into your preferred bucket?
Okay, onto the next clip. Now, standard advice
is fine for people who started saving at 20.
It doesn't apply to someone in my position who's
starting late. Okay, where's this guy going?
He thinks that good practice guidance on investing
for your pension doesn't apply to him because
he's starting late. And this hints to me that
he's going to go high risk, invest in something
like Bitcoin or some kind of newly listed. farm,
a company that's hoping to cure cancer. Now,
if they do, he's going to make a fortune. If
they don't and they run out of money, then the
stock goes to zero. Now, he's definitely, for
me, in the panicking bucket. He needs to stick
to a sensible plan and just work hard to build
his pot by cutting down on spending, not by throwing
the whole lot in red and crossing his fingers.
Okay, on to the next one. The stock market's
just like a casino. Why would I gamble all my
retirement money at my age? Ah, so the stock
market is just like a casino. Sorry, but this
is definitely going into the paralyzed bucket.
The stock market has many options and many routes
through it. For example, money market funds are
low risk and lowish return. Penny stocks are
super high risk with many going to the moon and
others going to zero. You can pick your own way
through. But discounting the whole stock market
will make it difficult for you to keep your savings
ahead of inflation. Okay, on to the next. When
the markets dip, I see it as an opportunity,
really. He says, when the markets dip, I see
an opportunity. Now, this tells me a lot in a
very short sentence. I'm going to put this person
in the pragmatic bucket, and here's why. To have
an opportunity means that some of your pot...
is liquid but you're also open to buying stocks
now my best guess at this stage is that this
person is invested in the stock market but not
all his pot is directly invested in shares he
may for example have some in bonds or some in
defensive stocks you can then liquidate these
quite quickly and buy other stocks when they're
low with a view to selling them again when they're
high of this is controversial as most advisors
will tell you that time in the market is a fool's
errand and there's actually plenty of studies
to agree with them i'd need to ask some follow
-up questions here to see if this person actually
did have a good grip on their own risk appetite
and understood the cost of moving in and out
of stocks frequently so not so clear -cut this
one Tell me if you think I picked the wrong box.
Okay, let's move on. Risk. The biggest risk I
have is a burden to my family because I didn't
take the chance when I could. Okay, so this person
thinks he's been too long in the paralyzed bucket
and needs to jump out and find a new bucket.
It sounds to me like he's headed for the panic
bucket, though. He's playing catch up and there's
a chance. He's looking to roll some dice rather
than keeping a steady head and following advice.
Next. Market volatility happens. It's just the
cost of admission for long -term growth. Wow.
Market volatility is the price of admission for
long -term growth. Sounds like something he's
read that resonated with him and he's memorized
it. Now, I don't have a problem with that. It
shows he's actively investigating his options
and increasing his knowledge of investing. I
actually like what he said. He's basically saying,
yeah, I guess there's risks, but there are rarely
rewards without some level of risk. Investing's
for the long game. So I'm going to put him in
the pragmatic bucket. Next. I'm actually waiting
for that perfect stock. And until then. I'm going
to keep my money in the high street bank. Too
easy this one. Straight into the paralysed bucket,
and if you're not sure why, then probably best
go back to the start of the video. Next. I'm
keeping my pension pot in cash until the market's
settled down a bit. Ditto. Move on. I'm not focused
on short -term noise. I focus on... a five to
10 year horizon. Okay, we have another resident
of the pragmatic bucket here. In short term noise,
what are the news this week? Well, stock market
crash due any day to the circular trading in
the AI sector. Maybe population collapse hits
all world economies. Pick a date in the past
and I could give you another headline that will
see some people selling their stocks and moving
into a wigwam in the woods. Short term noise.
It's the real thing. Stay consistent. Stay sane.
OK, enough of the videos. Here are three takeaways
to help you into that pragmatic bucket if that's
where you're looking to go. Separate your short
term liquidity medium -term stability and long
-term growth assets to avoid any emotional reactions
to this market volatility. Prioritize being tax
efficient. Use things like ISAs and SIPs for
your growth buckets to protect the returns from
potential tax erosion. And thirdly, build a contingency
fund or a safety bucket specifically to go for
those often underestimated first -year retirement
expenses, ensuring that you don't need to liquidate
growth assets during a market downturn. Now,
I need to be clear, I don't consider myself a
particularly judgmental person, but we all make
judgments because we're human. Now, these initial
assessments are often formed in seconds. They're
deeply ingrained and they reflect our... evolutionary
need to process information quickly and react
to potential threats or opportunities well these
immediate impressions they're powerful and they
do serve as a start point rather than final verdict
now recognizing this allows us to take a step
back challenge those early assumptions ensure
our conclusions are driven by carefully thought
through thoughts rather than snap decisions and
that's what i'm hoping this video will elicit
really is that you'll think about what bucket
you're in what bucket you want to be in what's
stopping you getting there hope you find this
useful see you on the next one