Investing for retirement
Investing for Retirement?
Hoping to retire in the next 5-10 years? Do you know the actual amount you need to survive without your current income – let alone live comfortably? There’s a lot of conflicting advice out there, and you won’t find a simple answer online. It depends on your existing wealth and what your financial goals are for your retirement.
In today's economic environment, low interest rates have been great news for many Australians - especially those with a mortgage. However, it has made investing to generate an income a challenge for many retirees.
What effects do low interest rates have on investments?
Plato Investment's Dr Don Hamson recently had his say;
"The expensive asset class now is CASH.
You don't normally think of P/E for cash, but if you are getting 1% on your cash, you need to invest $100 to make $1. The price to get $1 of earnings is $100"
Leaving your hard earned cash in the bank, is no longer the best option, with returns after tax unlikely to even keep pace with inflation.
Many retirees that have their capital invested in cash and term deposits are actually seeing their investments go backwards.
The key to retirement planning is to ensure you understand;
Your goals - no one can get anywhere unless they know where they want to go and what they want to be or do
Cashflow Requirements - understand your requirements to live and run your household. Also include any of your goals/holidays/trips that you have planned to ensure everything is included in your cashflow.
Capital Longevity - take the guess work out of it and understand how long your money is going to last.
Social Security Benefits available - understand what government benefits you are entitled to, whether this be an Age Pension (full or part), carers allowance, or other benefits. This will prolong your capital longevity.
This will support you in building a diversified portfolio that will enable you to manage the overall risk of your capital. Spreading your investments across a range of asset classes is a proven way to reduce risk in your portfolio. Maintaining an adequate level of diversity helps protect portfolios should certain asset classes be more affected than others from market declines.
While volatile markets can rattle even the most seasoned investor, such volatility can be particularly detrimental for an investor needing to rely on their portfolio to fund lifestyle needs in the short-term.
Newcastle Advisors understands that investors approaching retirement may not have the time to ‘ride out the storm’ and recover from market losses, and so we have developed over the past 12 years, our own pre-retirement/retirement investment philosophy to support.
When deciding how to invest, consider how much risk you’re willing to take, how much income you need, and the cost of investing.
At Newcastle Advisors, our advisors have been supporting baby boomers prepare for retirement for over 10 years now. We help you build wealth, minimise tax and protect your assets so you have financial security and peace of mind in retirement.