Market volatility can be scary if you’re heading into retirement. Knowing how to navigate this is key to your financial future. Knowing how much you need to live a comfortable lifestyle in retirement is essential. While saving more, spending less or working longer are options, let’s look at some other strategies that may give you higher returns.
Don’t Sell Shares
While markets can be volatile, remember equities have historically outperformed fixed interest over the long term. This is called the “equity risk premium” and is the reward for taking on the extra risk. Don’t sell shares in market downturns. This will stop you from benefiting from the eventual market recovery.
Look at boutique fund managers. They often have more flexibility than the bigger firms and may use absolute return strategies that aim for positive returns, whatever the market conditions.
Allocate More to Riskier Assets (with Caution)
While blue chip companies are stable, consider allocating a part of your portfolio to assets with higher growth potential:
- Small-Cap Stocks: Investing in smaller companies can offer higher growth, but with higher risk.
- Private Equity: Unlisted companies (private companies) can give you access to high growth investments but often with lower liquidity.
- Emerging Markets: Overseas shares in developing economies can offer diversification and growth, but with higher risk.
- High-Yield Debt: These debt instruments offer higher returns but with higher credit risk.
Research and due diligence is key when considering these riskier investments. Diversification within these asset classes is also important. Some fund managers specialise in these areas and may have suitable investment products.
Active Management
Skilled active fund managers can navigate the changing market conditions and find opportunities that passive strategies miss. They use complex strategies, moving investments between countries, currencies, sectors and asset classes to get higher returns. Look for managers with a proven track record and a focus on absolute returns. Keep in mind that actively managed funds may have higher fees than passive funds, which will impact your overall returns.
Use Gearing (with Caution)
Gearing (borrowing to invest) can get you higher returns but it can also get you higher losses. Consider your risk tolerance and financial situation before using a gearing strategy. Talk to your financial advisor about different gearing options to see what’s right for you.
Seek Professional Advice
These investment strategies require careful planning. Before you make any decisions, talk to a qualified financial advisor. They can help you assess your risk tolerance, create a personal investment plan and guide you to make informed decisions for your retirement. Contact us to discuss your options and build your financial future.
Are You Ready for Retirement?
However, before approaching investment strategies, it is important to assess your retirement readiness, which is the first step to planning for a comfortable retirement. Start by thinking about your retirement age. Are you retiring at the preservation age of 60 or do you plan to work longer? Your retirement age will impact your planning.
Next think about your super balance. Is your current super balance enough to fund your retirement goals? Knowing your super balance will help you decide if you need to contribute more or adjust your investment strategy.
Think about your retirement income options. Have you looked into ways to get a regular income in retirement such as an account-based pension or the Age Pension? These will give you a steady income stream and help you manage your finances.
Don’t forget to estimate your expenses in retirement. This includes healthcare, housing and recreation costs. Knowing your expenses will help you create a realistic budget and live the lifestyle you want.
Finally, consider your outstanding debts. It’s important to pay off debts before retirement to avoid financial stress. By considering these factors you can see if you’re on track to meet your retirement goals and make any adjustments to your retirement strategy.
Retirement Income Options
Understanding your retirement income options is key to a comfortable retirement. One option is an account-based pension which gives you a regular income stream from your super fund. You can draw down on your super balance as needed and have control over your finances.
Another option is the Age Pension, a government benefit that gives you a regular income stream if you’re eligible. Check your eligibility and see how the Age Pension can top up your retirement income.
You could also take a lump sum from your super fund. This gives you a one off payment but may impact your Age Pension eligibility. Weigh up the pros and cons of this option based on your financial situation and goals.
An annuity is another option, a guaranteed income stream for a set period or for life in exchange for a lump sum payment. This gives you financial security and peace of mind knowing you have a steady income.
When choosing a retirement income option think about your individual circumstances and goals. Get financial advice to help you decide what’s best for you and your retirement.
Healthcare and Insurance
Healthcare and insurance are key to retirement planning. Start by estimating your healthcare costs in retirement, including medical expenses and health insurance premiums. Knowing these costs will help you budget and get the care you need.
Consider your insurance options, private health insurance and government funded programs. Compare the cover and cost of each to decide what’s best for you.
Aged care is another to consider. Look into residential care and home care and understand the costs. Planning ahead will help you make informed decisions and get the care you need.
Don’t forget disability insurance. Having disability insurance will protect your income if you’re ill or injured and provide financial security when things get tough.
By planning for healthcare and insurance you’ll have the care and support you need in retirement and be able to live a healthy and happy life.
Retirement Challenges
Retirement challenges need to be navigated. One of the biggest is social isolation. To stay connected with friends and family join social groups, volunteer or participate in community activities. A strong social network is key to your mental and emotional well-being.
Staying active is another important part of a happy retirement. Engage in activities that keep you physically and mentally active, exercise, hobbies and lifelong learning. Staying active will improve your overall health and wellbeing.
Financial stress is a big worry for many retirees. To manage your finances get a budget that reflects your retirement income and expenses. Get financial advice to help you make informed decisions and invest well.
Accessing healthcare services is another challenge. Plan how you’ll get to medical appointments and hospital care, private health insurance, government programs or other ways. Having a plan in place will help you navigate healthcare needs.
By planning for these challenges you’ll have a smooth transition to retirement and a happy life.
Wrap up your retirement plan
Finalising your retirement plan means considering your goals, income and expenses. Start by reviewing your retirement strategy to make sure it’s aligned with your goals and circumstances. Make any changes needed to stay on track.
Update your budget to reflect your retirement income and expenses. A realistic budget will help you manage your finances and live the lifestyle you want.
Get financial advice to tailor your retirement plan to your individual situation. A financial advisor will give you valuable guidance and help you make decisions.
And finally review your estate plan. Make sure your will, powers of attorney and beneficiary nominations are current. Then you’ll be able to relax and know your wishes will be met.
By wrapping up your retirement plan you’ll have a secure retirement that’s what you want.