“We all tend to live in an ‘either-or’ world where we think we need to choose between two, often opposing, things or outcomes. Peanut butter or marmite? Red or white wine? For simple things, this way of making decisions can work. But for more complex issues such as investing your retirement savings, the either-or equation is too simplistic,” according to Ryan Hultzer, Pricing Actuary at Just SA.
He advises that when individuals plan their retirement, they should start by separating their wants and needs. Many may want to travel or start a new hobby or spend more time with their grandchildren, but their overriding need is to know they will have enough income to at least meet their basic requirements and expenses such as food, healthcare and housing for life.
Hultzer explains that an individual’s needs and wants are quite different, so it is worthwhile to consider which solution works best for each of these and avoid the simplistic either-or way of thinking. “Another way to say this is that you need to use the right tool to solve the right risk.”
Click here to read an article where he gives insights on life, living and blended annuities.
It is important that financial advisers do not only give their clients an “either-or” solution. Understand the client’s actual needs and develop a suitable investment strategy with your client.