July 11th, 2024

2 lessons Neil Armstrong’s moon landing could teach you about pension decumulation

When Neil Armstrong set foot on the moon in July 1969, it’s hard to imagine that the most dangerous part of his journey was yet to come.

Yet the physicists and mathematicians who chartered the mission’s course were most worried about one thing: whether the Apollo 11 spacecraft would safely re-enter the Earth’s atmosphere.

Indeed, any space expert will tell you that travelling back to Earth is even more dangerous than getting into space in the first place.

This has to do with speed. Enter the Earth’s atmosphere too quickly, and the spacecraft might burn up, putting the lives of the astronauts at risk. Attempt it too slowly, and the spacecraft might gain too much friction, also causing a risk of burning its surface.

You might be wondering: “What do Neil Armstrong and space flight have to do with my pension?”

Well, you may assume that saving into your pension is the hardest part of achieving a comfortable retirement. But much like space travel, decumulating – or “landing your spacecraft” – is a journey that must be treated with extreme care.

Let’s take a look at two lessons Neil Armstrong’s moon landing could teach you about pension decumulation.

1. Lengthy preparation is essential if you want to stick the landing

When Neil Armstrong was selected to be part of the Apollo 11 mission, he had little time to prepare. But before his selection, Armstrong had spent years training to withstand extreme conditions.

Having trained as a Navy pilot and being part of several space flight training programmes before, Armstrong’s steely mindset and physical fitness made him the perfect candidate.

Preparing to decumulate your pension is also a rigorous process. While making pension contributions as you approach retirement, it could help to look ahead and begin thinking about how you’ll draw the funds later.

After all, your personal pension will likely form the bedrock of your retirement income, along with your State Pension, investments, cash, and income from other sources like property.

So, a careful “descent into the Earth’s atmosphere” is crucial. Take your income too quickly, and it could “burn up”, meaning you have little left to live on in old age. However, approach retirement with too much caution, and you may also miss out on the amazing opportunities you always dreamed of pursuing in retirement.

There are three popular options you might consider when you draw your defined contribution/money purchase pension:

  • Purchasing an annuity – This option lets you exchange part or all of your pension fund for a regular income that lasts for a fixed period (often until the end of your life).
  • Drawing a flexible income – Flexi-access gives you the option to draw from your pension whenever you like.
  • Taking a lump sum – This means you’d cash in a larger portion, or all, of your pension pot when you retire.

A financial planner can discuss these pension options in detail, including how much Income Tax you might pay on your withdrawals. Bespoke advice could help you decide which method of decumulation suits you best, enabling you to stick the landing perfectly.

2. A team of experts can help you make a safe descent

According to the BBC, an unbelievable 400,000 workers came together to make Neil Armstrong’s “one small step for man, one giant leap for mankind” possible.

While your retirement plan might not need quite as many hands on deck, knowing that a team of experts is behind you as you begin your journey could bring you immense peace of mind.

Although the mission must have been nerve-wracking to say the least, Armstrong was aware that NASA’s huge team of mathematicians and engineers had modelled the journey in every way possible.

Similarly, while going from a full-time career to retirement might feel like a “giant leap”, it could help to know that your financial planner has tested your options using hard data. We use sophisticated cashflow modelling software to ensure no stone is left unturned when you’re planning your retirement.

Your financial planner will:

  • Incorporate external risks like inflation, market volatility, illness, or bereavement
  • Help to ensure you’re decumulating sustainably, minimising the risk of running out of money in old age
  • Guide you through every step of retirement, regularly checking in with updates on your plan
  • Give you thorough peace of mind that you’re on track for a safe, secure “landing”.

We’re here to make sure your pension decumulation journey is well-paced, and that it helps you achieve your goals in later life.

Get in touch

To team up with an expert who can help you make the leap into retirement, email enquiries@prosserknowles.co.uk or request a callback from one of our advisers.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.

Your pension income could also be affected by the interest rates at the time you take your benefits.

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