“Houston, we have a problem”: the now famous words of Jack Swigert, command module pilot of Apollo 13. (In fact, that’s a line made famous by Ron Howard’s 1995 film – Swigert actually told NASA “Okay, Houston, we’ve had a problem here”).
The story of Apollo 13 is well-known. Heading for the moon in April 1970, the crew aborted the landing after an oxygen tank in the service module failed two days into the mission. As the world held its breath, the crew instead looped around the moon, and returned safely to Earth.
While you might assume that the dangerous bit is getting into space in the first place, much of the danger occurs on the way back. It’s the same with commercial air travel – as the infographic below shows, there are many more fatalities on final approach and landing than there are on take-off.
So, what does this have to do with your retirement?
You may have spent a lifetime saving up for your retirement. You have probably paid into your employer, personal, or workplace pension for decades. You may have accumulated other assets, paid off your mortgage, and helped your children along the way.
This is generally known as the ‘accumulation’ stage. For the purposes of this article, let’s assume this was all the work you did to get to the moon (or to cruising altitude if you’d rather stay in the Earth’s atmosphere).
When you retire, your savings must then last you for the rest of your life. They must maintain your lifestyle, pay for later-life care, and provide any legacy you want to leave. This is the decumulation’ stage or, in our story, the part where you return safely to Earth.
With many unknowns, unexpected hiccups, and potential hurdles to overcome, managing your money through retirement is often the most perilous part of your journey.
Why is coming back to Earth so difficult?
To skim the Earth’s atmosphere in orbit, your craft must travel at least as fast as 7.8 km per second (around 17,500 mph). The Earth itself, with its atmosphere, is spinning eastward beneath you, at around 1,000 mph. Even if you orbit in the same direction as the Earth spins, you must travel at 16,500 mph relative to our atmosphere to stay in orbit.
If you slow down by a tiny amount below that speed, you will start to fall towards Earth. You will hit the atmosphere at thousands of miles per hour and will re-enter in a fiery descent. At this point, it’s only your heat aeroshell that protects you. Any miscalculation or technical failure could be fatal.
Of course, for the Apollo missions, this part came after days of careful navigation across 238,000 miles of space.
Managing your money in retirement
Reaching the moon is an incredible achievement, but it’s just the halfway point. Reaching your retirement after a lifetime of saving might feel the same – however, you must now manage your money through 20, 30 or even 40 years of later life.
Getting back to Earth used to be easy. You’d finish work on a Friday afternoon and wake up retired on a Monday morning, probably with an inflation-proofed pension from your employer, guaranteed for life.
Even if you’d saved up yourself, you could probably have taken a lump sum, bought an annuity, and relaxed knowing that your income would come in every month.
These days, the descent has all sorts of perils. For a start, perhaps you don’t want to plunge back into the atmosphere straight away? Maybe you’re happy orbiting for a while, and you want to transition into retirement – perhaps by working fewer hours?
Your retirement choices are also much wider than ever before. Pension Freedoms mean you have a range of options, but with greater choice comes greater complexity. Get it wrong and you risk a sizeable tax bill or, even worse, running out of money in retirement.
The importance of working with the experts
One of the consequences of the Apollo 13 accident was a build-up of carbon dioxide in the lunar module that the astronauts were using as a ‘lifeboat.’ As well as having to navigate back to Earth, the crew faced the additional complication of removing the CO2 from their stricken craft.
Engineers on the ground worked around the clock to devise a solution using plastic, covers ripped from procedures manuals, duct tape, and other items.
Mission commander, Jim Lovell, later described this improvisation as “a fine example of cooperation between ground and space.” Without this expert input, it’s unlikely the three astronauts would have survived the return trip.
Just as the Apollo missions relied on the experts at NASA, the chances of you navigating your retirement successfully are increased by working with a financial expert.
For example, research by Moneyfacts has found that individuals who don’t take advice before drawing down their pension are three times more likely to run out of money compared to those who sought the help of a financial planner.
In 2019, the Financial Conduct Authority’s Retirement Outcomes Review stated that 94% of individuals who go into income drawdown do so without taking advice and accept the drawdown scheme offered by their existing pension provider without first having shopped around.
This means that a large majority of people could be missing out on income drawdown solutions that offer a choice of investments that are more appropriate for their needs, or that have lower charges.
Research from consumer group Which? has found that the difference between the cheapest and most expensive drawdown plans was £12,000 lost in charges over a 15-year period.
Working with a financial planner can give you the peace of mind that you can maintain your lifestyle in retirement without the fear of running out of money. We can forecast your income in later life, ensure you’re taking sustainable withdrawals from your pension, and make sure you’re maximising all the tax efficiencies available to you.
While your “one small step” might be into a different phase of your life, and not onto the lunar surface, our job is to give you the confidence to take it.
Get in touch
If you want to find out how we can help you to manage your retirement, please get in touch. Please email firstname.lastname@example.org or call 01454 416 653 to find out how.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.