As retirement approaches, understanding retirement investment and strategies is crucial. The common view is to shift towards conservative investments such as term deposits, annuities, and cash management trusts while reducing exposure to volatile assets like shares and property. Preservation of capital is key to securing your nest egg.
Peter plans to retire on his upcoming 63rd birthday. He has $600,000 in super and wants this to provide him with an income of $50,000 per year. If his net return is 3% pa, Peter’s nest egg will last for just over 15 years[1]. The problem is there’s a good chance Peter will live into his late 80s or even 90s. To give his savings a chance of lasting until he is 90 (27 years), Peter will need to target a net return of 7% pa.
Chasing higher returns does involve taking on greater risk. However, for a well-designed portfolio, the great moderator of investment risk is time. Even over just a 10-year period, it’s much more likely that a ‘growth’ portfolio will meet Peter’s needs rather than a more conservative one. Just because you stop working doesn’t mean your money should too. To ensure your retirement investment strategies and nest egg keeps working hard through your retirement, talk to your financial adviser.
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[1] Does not take into account any age pension entitlement