Retirement Planning:

NOT JUST FOR THE OLD!Considering current life expectancies, you could be retired for 20 – 30 years. So why spend 10 years preparing for it, or even less? It’s a long time to be living poor. 

Did you know that 88% of people aged 45 and over expect to receive some form of government pension/subsidy in retirement?

 

Retirement isn't short term so why should you invest that way ?
Maintaining a comfortable lifestyle throughout retirement does mean a new approach to financial planning for retirees - one which ensures that your investment portfolio generates the kind of returns necessary to combat tax and inflation over 20 years or more while also meeting your needs for regular income and allowing you to have the lifestyle in retirement that you want.

Investing solely in cash and fixed rate investments is unlikely to be the complete answer. The mere guarantee of your principal should not be the primary focus of a retiree's portfolio. This is because the main risk you face is not losing your capital - it's outliving your capital. And it happens all the time.

 

Do you want to be forced to live on half of what you planned to, or less ?
Over a 20 year period, retirees can expect living costs to almost double if inflation averages 3% pa. In other words, the value of your capital and the interest income you receive from a fixed rate investment will be worth just over half their current value. The real solution is to consider having part of your investment portfolio in growth assets such as shares and property, to allow your capital to grow over the long term and offset the effect of inflation.

 

 What retirees believe:

“I thought my superannuation would be enough, but it’s not”
"I thought I'd have enough savings to live comfortably in retirement, but it wasn't enough.”
"I need a secure income stream - fixed term investments are my only choice."
"I cannot touch my principal" -"I need all of it to generate my investment income."

 

However the truth is closer to:

- Retirement could easily last upwards of 20 years - a long term investment horizon

- Growth investments can provide a growing income stream as well as capital growth over this period.

- In a portfolio that includes growth investments the capital can actually grow over time. Therefore you can withdraw capital to supplement your income.

- The longer you hold the investments, the better your retirement will be. 

 

What you can do about it

If you would like more information please come in and see us today to talk about your exising retirement plan or where to start when creating one.

We can also help you with estate planning, enduring power of attorney, creating or updating your will, how to get the most of your superannuation and any other financial matters you need.

Prepared by John Hehir - Financial Advisers Australia (FAA)