A man planning for his retirement asked about when he should access his funds
Martin Lewis has offered his perspective on building savings and investments for your retirement and later years. He addressed a question on his BBC podcast regarding how best to manage your funds.
A listener rang in with a query as they had recently began investing through a stocks and shares ISA with Moneybox. The man explained he was contributing £50 monthly into a more adventurous investment portfolio.
He said he was also building up some cash savings, and was paying into a workplace pension. His query centred on the appropriate age to withdraw his investments. Mr Lewis reminded listeners of his general principle: “My investment rule is if it’s money that you don’t need and you’re putting it away for more than five years, savings is the poor relation to investing, so you should consider investing.”
The person said he was 47 and intended to access his investments at 60. His question was whether, given Mr Lewis’ five-year guideline, he should cease contributions at 55 to allow these final investments sufficient time to mature.
The long-term trend
Responding to the enquiry, Mr Lewis clarified the reasoning behind only placing funds into investments if you won’t need them for at least five years. He explained: “The reason for saying five years is because markets move up and down, that’s literally the point of them, they are volatile.
“What you’re more interested over the five years is the long-term trend.” Mr Lewis highlighted another key reason why it’s wise to allow yourself a substantial timeframe during which you don’t need to dip into the money.
He explained: “The reason we talk about a long period is to ride out the short term. You don’t ever want to be in a position where you need the money today and today is a bad day to take the money out.”
Retirement plans
Mr Lewis confirmed with the listener that since he didn’t require the funds urgently, the aim of withdrawing his investments at 60 was just a rough target for him. The man verified this was his thinking, explaining that he’d selected that age as this was when he planned to retire.
The consumer champion told him that his five-year guideline errs on the cautious side. Some investment specialists suggest three years might provide enough time for investments to grow.
Mr Lewis presented the novice investor with an alternative approach: shifting his investments into a more conservative portfolio as he approached his 60th birthday. He said: “I don’t think there is any blanket moratorium on you continuing to invest nearer the age of 60.”
Soft guidance
Outlining the various possibilities, Mr Lewis said: “If you’re going more cautiously and you’re only talking about money that you’re dabbling with, you could push it up to 57 or 58.
“You might also think, I might not take it all out when I’m 60, I might even put some more in at that point for it to grow later and for me to keep the pot growing. See it as a soft guidance concept rather than a hard rule.”
The person also enquired that should he transfer some funds into a more conservative and lower-risk investment, how much should he move over. Mr Lewis explained this decision rests entirely with him and it is “perfectly reasonable” to make such a transition as you near the date when you intend to withdraw your investments.
Mr Lewis offered some final words of encouragement to the novice investor regarding when it comes to make these decisions from the age of 55. He said: “I know you’ve only just started, but I think you will be a lot more educated about the situation then and more confident in making your own decisions at that point, which is why it’s great that you’ve started.
“Some of this is learning money. You should see it as learning money.” If you’re purchasing investments through an ISA wrapper, you can invest up to £20,000 each tax year through these tax-free accounts.
ISA changes
ISA allowance rules are being changed from April 2027. At present, you can utilise the entire £20,000 allowance for deposits into either cash ISAs or stocks and shares ISAs, divided as you choose.
Nevertheless, from April 2027 you will only be permitted to use up to £12,000 of the allowance for either account type, while the remaining £8,000 will solely be available for investments. Those aged 65 and above will be unaffected by the new regulations and will keep their existing allowance.
