5 tips to transition your investment strategy for retirement
Some guidelines to keep in mind when considering your retirement investment strategy.
Once you retire, your regular pay cheque no longer hits your bank account. Therefore, it makes sense to invest some of your financial assets into strategies that will replace that pay cheque and give you the confidence that your regular, essential spending needs will be covered.
Keep the following tips in mind when considering your retirement investment strategy:
- Income-producing growth assets are important
Over time, your regular expenses are likely to rise with inflation. This is why growth assets are important. Look for assets, strategies and products that seek to pay a consistent, predictable cash flow and that will actually deliver to that expectation. Just be mindful that you don’t give up on total return in seeking that outcome.
- Rethink term deposit investments
Term deposits are actually a poor investment because the income stream they deliver is highly variable over time and likely to remain low for an extended period.
- Quality is crucial
High quality assets with strong total return expectations are best, especially those where an unusually large proportion of their return is from their current income, and where the return can also be expected to rise over time. Asset classes that fit into this category include Australian and international shares, corporate bonds, property and infrastructure.
- Don’t be tempted by high yields
Sometimes an asset has a high yield because it is low quality, and the income stream it purports to deliver may not be sustainable. This is where detailed investment analysis is important.
- Imputation credits
When it comes to Australian shares, keep in mind the importance of imputation credits attached to dividends. This is particularly the case for SMSF retirees, as there is a 0% tax rate on both capital and income. Therefore, imputation credits can be turned into income. It makes sense that the Australian share strategy you adopt post-retirement is different to that in accumulation.
About the author
Jeff Rogers joined AMP Capital in 2011 from ipac Securities and he has over 27 years of investment management experience. Jeff holds a Bachelor of Science (Honours) from the University of Melbourne.