Britain is still dealing with the shock of the untimely decision to leave the EU. No group was more immediately affected by Brexit than retirees. Many retirees who had IRAs and savings in the pound saw their portfolios lose value when the pound dropped following Brexit. Though the falling of the value of the pound has largely been stalled, overall value of the currency remains flat.This means many retirees will not see their IRAs grow anytime soon.
The Latest Developments with Brexit
Prime Minister Teresa May has promised a “hard Brexit,” meaning that the country will not remain a part of EU even partially. Negotiations to finalize leaving have yet to begin, as the British government is still formulating a plan of exit. It’s unlikely that Britain will lose all trade ties to EU’s single market. The head of the World Trade Organization recently said that Brexit is very unlikely to disrupt Britain’s trade ties.
Though experts believe that Britain will not be subjected to the worst fears of Brexit, the performance of the pound is rattling many. The pound continued on an 18-day downward spiral following the Brexit, a trend traders described as a "mini flash crash." Right now, the pound sterling is the weakest it has been in decades. Recently, the pound managed to gain ground, meeting extremely low expectations. It can be said that the pound is rebounding based on reduced expectations.
Though the pound is flat, economic data in Britain have been unexpectedly positive. So, Britons won’t have to worry about an interest rate cut anytime soon.
How Brexit is Affecting Retirees
Brexit will have a significant impact on retirees who mainly rely on cash and currency investments. Brexit’s immediate impact will be on people who are going to retire in the coming two to five years. Those who plan to retire in a decade or so have less to worry.
The pound crash means that most cash investments are losing value. It should also be noted that Britain’s economic future is still largely uncertain. No one is sure about anything as there is no government exit plan unveiled yet. Retirees, therefore, should take steps to protect cash investments.
The best way to protect your IRA and plans for the future is to diversify your portfolio. Do not bet it all on Britain and invest elsewhere, in economies with less uncertainly looming over them.
How to Protect Retirement Funds After Brexit
British retirees should slowly begin the process of diversifying their portfolios and savings plans. If currency investments are important, it’s worthwhile to have assets based on the US dollar, yen, and other less unstable currencies. The best method to hedge any losses due to a falling pound in the future is to invest in precious metal.
How can precious metals protect your IRA against the falling market? Precious metals, like gold, are valued against the currency. So, when the pound falls, as it did following Brexit, the price of gold rose significantly. This trend can prove to be useful in an uncertain economic situation.
If you have currency savings and investments, having gold or silver on your portfolio can hedge any potential losses. In case the pound crashes again in the future, you will have ensured that a small portion of your investments have been protected.
This article is presented by Lear Capital, a financial firm specializing in precious metal investments.