You may have some ideas in mind already for how you’re going to fund your retirement. A property sale, family inheritance, or even the sale of a business could help boost your retirement pot.

However, life rarely follows a smooth script, and banking your entire retirement strategy on a single event can be risky.

When your future lifestyle depends on a single transaction going smoothly, you leave yourself exposed to economic shifts, changing tax rules, and unexpected delays.

Keep reading to find out more about how this could impact you, as well as what your next steps might be.

There are three common single-event traps

Relying on a single windfall can create a false sense of security. While these can significantly boost your wealth, treating them as your primary safety net leaves you exposed to unnecessary risk.

1. “My house is my pension”

For years, rapid UK property growth led many to believe that property, whether a primary residence or a buy-to-let portfolio, could act as their primary retirement nest egg.

However, the 2008 global financial crisis had a significant effect on this. According to figures from HM Land Registry, the average UK property value decreased from a peak of £174,280 at the end of 2007 to a low of £142,278 by March 2009.

A prolonged period of stagnation followed, and house prices only recovered to a similar level in July 2014.

For retirees who needed to downsize or release equity held in a property to help fund their retirement, this crash left them financially exposed.

While data from HM Land Registry highlights that property prices are increasing, movement can be slow. There is also no guarantee that your home’s capital value will continue to rise in a predictable manner. If you own buy-to-let property, there is also no guarantee that rental yields will remain profitable. Moreover, the landscape for landlords is becoming more challenging, with increased mortgage costs, higher taxes, and the abolition of “no-fault” evictions.

2. “I’ll rely on an inheritance”

Financial Planning Today reports that close to a third of UK savers expect they will need an inheritance to afford a comfortable retirement. However, relying on a future windfall in this way could have significant consequences.

Inheritances are notoriously difficult to predict for several reasons:

• Increased longevity means loved ones may require care for longer in later life, eroding any capital left behind.
• Changing Inheritance Tax rules can impact how much remains after a tax bill, particularly if the estate was not prepared.
• Unexpected end-of-life expenses can quickly add up.
• Family members may simply live longer, happier lives, so funds could come later or be smaller than expected.

Relying on another person’s finances to bolster your own carries inherent risks. While you can factor a potential inheritance into your broader financial plan, making it the foundation of your retirement can leave you on rocky ground.

3. “The sale of my business will fund my retirement”

If you’re a business owner, your company may represent a significant portion of your wealth.

It’s easy to assume, then, that selling your business will provide a lump sum on which to retire. However, industries evolve, values change, and there’s no guarantee you’ll find buyers at the right time or price.

While the sale of a business can add substantial capital to your portfolio, it’s difficult to predict every aspect of such a transaction.

Here are the risks facing single-event retirees

When you tie the comfort of your post-work life into a single windfall, you’re exposing yourself to economic headwinds that you cannot control, including:

• Inflation risk: A delayed windfall means your baseline cash savings lose purchasing power as inflation increases, eroding the value of your money in real terms.
• Market and timing risk: If economic conditions cause a market downturn right when you need to sell your business or property, you might have to accept a significantly reduced price or postpone your retirement indefinitely.
• Legislative uncertainty: Shifts in government policy, such as changes to Capital Gains Tax, Business Asset Disposal Relief, or pension tax relief, could substantially reduce your net proceeds if you do not plan ahead and take them into account.

Without a diverse portfolio and financial strategy, any unexpected hurdle could leave you stumbling into retirement rather than strolling into it.

Building a multi-asset, resilient plan will serve you better in the long run

Building a robust retirement plan doesn’t mean you need to reject the idea of property, inheritances, or business sales altogether. They can be incredibly useful and complement a wider plan, rather than acting as the sole pillar of your retirement.

Focusing your attention on growing your pension funds, ISAs, and wider investments may be more valuable than relying on a single, variable event.

Indeed, ensuring your portfolio is able to survive on its own is ideal.

After all, if your property sale or inheritance comes through as expected, then you have access to more financial freedom. If it’s delayed, reduced, or unexpectedly taxed, your baseline retirement is still secure.

Get in touch

If you want to review your current retirement strategy and ensure that your future isn’t reliant on a single outcome, we’re here to help.

Get in touch with us today by emailing info@blueskyifas.co.uk or calling us on 0118-987 6655.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.