WHEN you reach retirement age, what should you do with your money? It is a simple question but one that is fiendishly difficult to answer, given all the variables involved. For those dependent on the state, it is a question of having enough to afford three meals a day and keep the house warm. For those still lucky enough to have a final-salary pension, fewer decisions need to be made. The real problems arise for those who reach retirement with a pot of money, accumulated through the various defined contribution schemes (401k in America).

Those retirees have a lot of imponderables to consider; how long will they (and their partners) live? What investment return can they expect? What will be the impact of inflation? What will their spending patterns be (will they face big bills for nursing care in their final years)? How will the tax regime change? In financial jargon, they face both investment risk and longevity risk. 

No one can know the answer to these issues. You can get advice, certainly, but that can only help in the most general sense. The current tax rules are always worth knowing. Longevity may not be well…Continue reading

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