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Managing the present and the future with a young family

When you’ve got a young family, you want to give them the best start in life – this includes providing them with financial security. But it can be difficult knowing you’re doing the right things for your family when you feel you’re just finding your legs on the financial markets yourself.  

That’s why we were so happy to meet Michelle over a year ago. She had never invested before and after a decade of building up her savings in a cash ISA, the married mum of two was fed up with the measly returns offered by the high-street banks. Wanting more from her money, she made her investing debut.

Busy juggling her career with her family life, Michelle doesn’t have the time, knowledge or interest to manage her investments herself, but she knows she needs to do something to take control of her financial future. This is why she prefers to leave the management of her ISA to the experts.

“That’s the beauty of the Moneyfarm Stocks and Shares ISA. I want the experts to do it for me, and am happy to take risk of fluctuations of the market knowing they are in control.”

Moneyfarm provides all its customers with regulated investment advice, matching people with investment portfolios that are specifically built and managed by a team of investment professionals to suit their investor profile.

The investment advice Michelle receives continues for as long as she invests with us. Once a month, or whenever something big changes on her account, our suitability algorithm will run to ensure she’s invested in the right portfolio for her risk appetite and financial goals.

Financial security in retirement

Michelle works and saves hard to build a financially secure future for her family. To her, financial security means keeping a roof over her head in retirement, helping her children through school and university, and then hopefully onto the housing ladder.

Her overarching aim is to retire with her husband, who is five years older than her. By retiring earlier than the state pension would usually support, they both hope to spend quality time together after decades of hard work. They’ll be mortgage-free by then, and be able to enjoy retirement to the fullest.

She muses: “67 isn’t that old, I’ll still be active and be able to enjoy life, although I might still have a family to support if they go to university.”

Otherwise, she’d love to travel to the parts of world she hasn’t seen: “It would be great to get back to pre-children phase where you can just jump on a plane when you find a good deal.”

Michelle knows that money can’t buy time, but through careful planning and by sticking to her pension savings plan, it is something she hopes to afford.

“We don’t know if there will be a state pension when we retire. It’s a priority to make sure we are comfortable, keep a roof over our heads, go on holiday once a year, keep a car on the road. It’s about making sure we have enough.”

Make the most of employer contributions

She has two employer pensions, a small defined benefit fund from a previous employer, and a good defined contribution scheme into which her employer doubles her contribution.

Her employer gives her the option to take some of this as cash, but Michelle is maximising the benefits available to her. It’s money she has never seen, so she doesn’t miss it, she explains.

As she gets older, Michelle is thinking a lot more about her pension,  how we wants to spend her retirement and whether the two match up. Although Michelle is a meticulous saver and she’s making the most of her work place pension, she’s knows there’s a gap between where she currently is and where she wants to be thanks to the use of online tools like Pension Calculators.  

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“I’ll come back once a year to check, hopefully this will sort itself out. As priorities change I’ll know that I can put more in pension to make-up this gap,” she explains.

Michelle talks a lot about priorities, and the one that tops the list is her children. She’d love to open a Moneyfarm Pension but she’s reluctant to lock any more away with a young family.  This isn’t uncommon. Her emergency cash buffer is where she wants it to be so she is prepared to increase her pension contributions when her priorities change.

Of course, she has concerns – namely around the value of her pension pot. Although Michelle is comfortable that this value will fluctuate and, in her early 40s, she knows she’s young enough for things to recover from any short-term volatility.

The minefield of managing retirement income

After pension freedoms, Brits have much more flexibility as to how they use their pension savings, but this can be confusing for families looking for the best way to protect their retirement income throughout retirement.

“I could buy an annuity and drop down dead. But if I live to 93 I won’t need half of my income then. Drawdown option is very attractive in that scenario,” she explains.

“It’s a minefield, it’s impossible to tell what will be best for me in the future. I’ll get financial advice, but I won’t leave it to last minute. I’m very financially cautious. I’ll know at 55 my path to retire at 65 – my best case scenario.”

Moneyfarm’s Investment Consultants help many investors explore their options when it comes to withdrawing from their pension. Whilst they aren’t able to provide pension advice, then can answer any of your questions and help you research so you have everything you need to make the best decision with your money.

Michelle and her husband also have a buy-to-let property, and they are flexible as to whether they will get retirement income from the rent, or sell it and either swap the lump-sum for annuity or invest it and enter flexi-access income drawdown.

Michelle can check on her employer pension whenever she likes, but she chooses to do it annually. She can see the performance and how much she has paid in fees.

For now she is happy with the contributions from her employers, but if she were to change jobs she would look more closely at performance, decide whether it is good value for money and able to help her reach her goals.

What’s very clear is that Michelle is financially savvy – she knows what she needs to improve her chances of retiring early with her husband and is doing everything she can to give her children the best family foundation.

Our free Pension Drawdown Service helps you make confident, stress free decisions to stay in control of your retirement income.

You can use Moneyfarm’s Pension Calculator to help you work out how much you need to be saving a month to get the income you want in retirement, or start one of Moneyfarm’s regular investment plans.

Making sure you plan for retirement in the best way for you and your family can be difficult. If you need any help, talk to an independent financial adviser and be sure to read our pension guide.

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