Ask an Adviser - Where To Invest In The Covid-19 Pandemic Recovery (3)

Top answer provided by:

Stephen Nielsen

View

Thanks for your question Nick.

Your question is very understandable in the current circumstances. Retirement brings with it the need to really make your money last; you’ve had your final payday, so everything that follows will be determined by the actions you set in motion now. For me, the important thing to remember is that your retirement date is not going to be your final destination.

You need to be looking at the much longer term. For example, if you retire at 67, as a male you’ll have on average another 17 or 18 years of life expectancy.  For females this is likely to be nearly another 20 years. It is likely that to be safe, you should plan for at least another 5 years post your life expectancy. For this reason, where you put your money now, needs to take account of the need for it to be producing income for some time after you finish work. Sound planning would be to establish the goals and objectives that you have in retirement, and the amounts of money you will need to but beside each of them.  This will give you an idea of how much you will need.

Next you need to think about any gap you have and what level of risk you are prepared to take to get there. The last couple of months has shown how quickly things can turn in financial markets. Retirement coming in the next ten years will in part inform the investment strategy going forward. There is a need to start now to build an allocation to conservative assets (cash and fixed interest) to fund the initial few years of income. This will buffer you from market volatility.

For example, if you have all of your funds in Australian Shares and the market corrects by 25% in the year prior to your retirement, you will start with 25% less. This may put in jeopardy the goal of having sufficient funds to last until life expectancy and beyond. Good planning will start with the need to build this conservative ‘buffer’ between now and retirement. To minimise the volatility, a diversified portfolio will go a long way to balancing the risks of just investing in any one asset class. What makes up this balanced portfolio, will largely be driven by your goals and objectives, and the investment risk you are prepared to take to achieve these.

While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.

Article by:

Stephen Nielsen

Was this helpful content?Let others know - share and vote-up