Scott Kingsley, Senior Wealth Advisor
For most of our working lives, retirement planning comes down to a single question: will the investments perform?
We save steadily, watch the markets and measure progress against the returns we hope to earn. That focus is understandable. For decades, the growth of a portfolio is the thing that changes most visibly from one year to the next.
But when the salary stops, the problem changes shape. It's no longer about building up a pot of money; it's about funding years of spending from it. Advisers sometimes call this shift decumulation, and it asks a different set of questions. Investment performance still matters, it just stops being the only thing that matters.
Retirement security has less to do with achieving the highest possible return than with whether an income can hold up across a wide range of future conditions.
Four risks in particular shape that question, and each carries an added layer for expats whose money, income and spending are spread across more than one country.
Inflation does most of its damage slowly, which is exactly why people underestimate it.
So little seems to happen in any single year. But even a modest rate, say three or four per cent, compounds relentlessly over a retirement that might last three decades, and money that felt more than sufficient at sixty-five can feel noticeably tighter at eighty. Nothing's gone wrong. The cost of ordinary life has simply kept climbing while a fixed income stood still.
For expats, inflation is often compounded by a separate currency risk. Someone whose income or assets sit mainly in sterling but whose spending is in euros or dollars is exposed to two different forces: local price rises where they live, and movements in the exchange rate that decide how far those savings actually reach. A comfortable budget drawn up in one currency can look quite different a decade later, once rates have moved against you. So it helps to think about inflation in retirement not as an abstract percentage, but as the real basket of costs a client expects to face, in the currency they'll actually spend.
Longevity is an odd risk to plan for, because it's the risk of something most of us would welcome.
We're living longer, and a retirement beginning in the mid-sixties may need to fund spending for several decades. That's a pure gift, but it's also a reality that has to be paid for. The danger isn't living a long life; it's outliving the money meant to support it.
The instinctive response is caution: spend less, hold back, keep a reserve untouched just in case. But that instinct carries its own cost. It can mean sacrificing the early, active years of retirement out of fear for years that may never unfold the way you dread. Planning only to average life expectancy carries the opposite danger, leaving too little margin for those who live substantially longer. The better approach sits between the two: sustaining a long life without demanding that every year be lived as though the money's about to run out.
For expats, this also means thinking about where the later years might be spent. Healthcare costs, the availability of care, and the point at which someone might want to return to a home country all carry financial weight, and they're far easier to accommodate when considered early rather than confronted late.
Markets rise and fall, sometimes sharply, and no sensible plan pretends otherwise.
But volatility during the saving years and volatility during the spending years are two very different experiences. While you're still working and contributing, a market fall can even work in your favour: you keep buying in at lower prices, and time's on your side to recover. Once you're drawing an income, the same fall lands very differently, because you may be selling into it rather than buying.
Seeking long-term returns above inflation generally means accepting some risk and some periods of volatility along the way; the two are hard to pull apart. So the task in retirement isn't to remove volatility, which can't be done. It's to structure near-term income so a market fall is less likely to force the sale of growth assets at depressed prices just to cover the next few months of living costs. And that leads straight to the fourth risk, the one most often overlooked.
Sequencing risk, or sequence-of-returns risk, is the least familiar of the four and often the most consequential once income begins.
It's not about whether markets fall, but when. Two retirees can experience the same set of annual returns over twenty years and still end up in very different positions, purely because those returns arrived in a different order while withdrawals were being taken.
The reason's straightforward once you see it. If withdrawals require growth assets to be sold after a significant fall, part of that decline is crystallised, and less capital remains invested to share in any recovery. All else being equal, a severe fall early in retirement can do more damage than the same fall later, because the withdrawals start eroding the portfolio before it's had a chance to rebuild. Same returns, very different outcome, shaped largely by timing no one can control.
Because sequencing can't be predicted, it has to be planned around, and there's no single fix. Sensible responses tend to combine several things: holding enough in cash and lower-risk assets to cover nearer-term spending, drawing on secure income where it's available, keeping some flexibility over discretionary withdrawals after a poor run, and maintaining a diversified portfolio built around a client's genuine capacity for loss. For expats there's a further layer. Converting income or assets when an exchange rate is unfavourable can temporarily reduce the amount available in the currency the bills are actually paid in, a timing risk of its own that a good plan tries to smooth.
Set these four risks side by side and the common thread is income, not investment selection. The real questions are how much can be drawn, from where, in which currency, and in what order. They also feed one another: inflation can force higher withdrawals at exactly the moment markets are weak, which amplifies sequencing risk. A portfolio assembled with great care but drawn on without a plan is exposed to all of it at once.
This is where retirement income planning earns its place.
In practice, it means testing a few things in advance:
A well-designed strategy can improve resilience considerably. What it can't do is make up indefinitely for an income requirement that's simply too high for the resources available, which is one more reason the planning is best done early.
For expats, the case for planning income rather than chasing returns is stronger still. Multiple currencies, pensions held in different countries and varying tax treatment all add layers a returns-focused view can't see. Tax is a good example: how a pension's taxed depends on individual circumstances, country of residence, the type of pension and the relevant double-tax treaty, and the rules can change. These are exactly the moving parts that reward good financial planning.
None of this needs to be a source of worry. These risks are manageable, but they're far easier to address when spotted early, while there's still time to shape the plan around them. If any of it feels close to home, it's worth talking through before the income has to start rather than after. That's usually when the four risks are easiest to plan around, and when a good plan does most of its work.