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5 tips to help your retirement savings last the distance


Ensure that your portfolio continues to grow in retirement.

Retirement can be a very rewarding time of life when you finally have more time for travel, family and new activities. In order to really enjoy these years, your retirement funds need to last the distance. In this article, we outline some key considerations.

Grow your savings early

The years leading up to retirement are crucial ones for your retirement savings. This is the time to further grow your savings so that you will not be caught short during your retirement years.

Cover your basic cash flow needs

The first requirement most retirees need financially is income, or cash flow to meet short-term needs. In retirement, this can be generated by drawing down on your pension or superannuation or by investing in income assets such bonds, cash and term deposits which provide regular yields. We believe these assets can be an important anchor for your investment strategy, providing stability and a regular income.

Beat inflation with growth investments

One of the greatest challenges in retirement is keeping pace with inflation. Even if inflation is low, it can still have a significant long-term effect and will eat away at your retirement savings. When considering your investment plan in the years leading up to retirement, consider strategies that will provide both cash flow and growth. That way, you will be better able to stave off the effects of inflation so that your income meets your long-term needs.

Look at all the options

Understandably, the closer most of us get to retirement, the less likely we may be to take risks with our savings. When investment markets are volatile we may be even more likely to seek security and put our savings in conservative assets such as term deposits. This strategy makes sense when interest rates are high but with interest rates falling now may be a good time to take a look at some of your other options.

Periodically assess your investment plan

If retirement is not too far down the track for you, it is important to regularly assess your investment plan to make sure your savings are on track. It may also be important for you to have the ability to change your level of income. As your lifestyle or circumstances change, or as your living expenses increase with inflation, you may need the flexibility to adjust your income to reflect these changes.

So, what’s the solution?

The type of investments that may be right for you will generally depend on your life stage and your appetite for risk. If you are close to retirement you may want some of your portfolio invested in defensive assets that protect your capital and some in assets that have the potential to add growth. Corporate bonds may be a useful alternative for investors who want higher returns than term deposits; they can generate capital growth and may act as a good portfolio diversifier when equity markets are down. There are also a number of attractive options across equities, real estate investment trusts, unlisted non-residential property and infrastructure that can offer SMSF investors adequate and sustainable dividends.

Final thoughts

Investment always involves some level of risk. Growth assets such as equities may involve a higher risk of fluctuating prices over the short term. In saying this, putting too much into defensive assets such as term deposits could put you at risk of not having enough income in your retirement. The trick is to invest your retirement savings in assets that meet your need for regular income but that also earn enough to keep up with the cost of living. Since we’re living longer than ever, you’ll also need to ensure that your portfolio continues to grow in value while you’re in retirement.

About the author
Jeff Rogers joined AMP Capital in 2011 from ipac Securities, following its acquisition by AMP Ltd. He has over 27 years of investment management experience. Jeff holds a Bachelor of Science (Honours) from the University of Melbourne.


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