How important is investment selection for retirement success?

The answer is going to make you rock back on your heels…

There’s something that’s more important than your investment selection…

That if you don’t get dialed in…don’t get right from the start, you risk your retirement dreams blowing up in smoke…

The ticking time bomb…

We met with a couple last year who came to us for some retirement planning advice.

On the cusp of retirement…they were looking for confirmation they had done enough.

They had set themselves up well…taken the self directed path and set up a self managed super fund.

As we started to delve more into their plans, they had roughly $1.2m in their self managed super fund.

So far so good…

Our attention turned to the investments in their self managed super fund. On the surface it seemed like they had everything under control.

As they listed off their investments, I took a deep breath…with my jaw dropping in shock.

They were 95% in shares…

Oh boy, I thought to myself…there’s a real blind spot that potentially could blow up their retirement when they least need it too.

To gain a better understanding as to why they had invested this way, I asked about how they formed their investment strategy…

The husband told me they were working on 10% return a year and that would see them through retirement.

Pretty simple calculation you’d think…made sense…

Thinking to myself…as the devil’s advocate…what if the portfolio didn’t generate that return every year…

…what if the markets plummeted how would they feel…

…how would they react?

It was like putting your whole house on black and hoping for the best.

Get your PDF copy of ENOUGH? here…

Painting the wrong picture…

We gathered some more details and started plugging the information into our sophisticated software.

The results were fantastic, exactly what they wanted to see…

Their investments would continue to grow and see them through their retirement years quite comfortably. With a healthy amount for the kids for good measure.

Major blind spot…Risking retirement?

What these calculations didn’t show was the impact of market corrections.

Their retirement could last more than 30 years. Potentially they could experience three or more market corrections.

How will they react when their investments plummet like a lead balloon? Dreading the next piece of news to be announced…

Would they panic and sell at the wrong time in hope of stopping their portfolio drop further?

Or would they have nerves of steel and stay the course?

We are only human after all…

You see, responding to market fluctuations is a major determinant of returns.

There is a high chance they would panic and sell out…

Potentially ruining their retirement.

Now no one wants that.

The financial industry wants you to take risk…

As humans we are prone to overconfidence when it comes to the decisions we make.

Investing is no different…we think we are better than what we are…

The fact is it’s nigh on impossible to beat the market…so why do so many risk their retirement on a hunch rather than evidence?

Here’s the thing, there is a whole industry that dedicates billions of dollars to convince you to take risks.

It’s what I call “financial pornography channels”. Feeding off consumers need for greed.

The crucial step most pre-retirees and retirees fail to take…

There is a better, a much more predictable, reliable way to safeguard your nest egg in retirement.

It all starts with your numbers…

How long is your nest egg going to last under different return assumptions?

Not inflated overconfident assumptions but prudent numbers.

It should be the only way you determine how much risk you need to take with your investments.

Imagine for a moment, after crunching the numbers you knew what was going to happen to your nest egg under prudent assumptions.

What if you knew you could live the retirement lifestyle you wanted, free from running out of money.

By only achieving a real return of 3%, 4% or 5%…

Why would you risk your future by chasing higher returns?

When you could just set up a low cost, low risk, widespread portfolio designed to give you what you want: financial security and peace of mind.

Monumental disaster avoided…

For this couple, they were one market correction away from a monumental, retirement destroying disaster…

We identified they needed to achieve a modest return to make their money last the distance.

After running the numbers they only needed to accept half the risk they were currently taking.

They didn’t need to expose their nest egg to a potential disaster…

Which could have seen them experiencing a $600k drop in their nest egg. Not to mention the stress and anxiety it would cause.

A reworked investment strategy…

One which allowed them to sail through choppy markets without being forced to sell shares when they fell…

…significantly reducing the level of risk they were taking…the wife was relieved.

Investments allocated to do one specific thing…to generate a return that would see them through retirement comfortably.

Knowing they would not run money…nor risk a monumental disaster…

No longer did they have a hope and prey strategy but a real plan.

Lifestyle or market beating returns…

It’s important to assess what’s really important to you in retirement.

Is your focus on trying to outwit the market…

…or setting yourself up so you can enjoy a comfortable lifestyle? Free from worrying about your money.

Don’t get me wrong, it’s okay to have an interest in investing. Some do it well…

But many are terrible at it.

It’s the lifestyle you’ve lived your going to reflect on when sitting on your deathbed, not the return you’ve achieved.

Three phases to retirement success…

#1 Financial x-ray

Understand what’s going to happen to your nest egg. It will identify blind spots and potential financial weak spots you have in your current plan.

You need to understand your long term cash flow. It’s where the rubber hits the road. It’s the most important aspect of planning a comfortable retirement.

#2 Retirement Roadmap

You need to have a roadmap to guide you up to and through your retirement. Without this it’s like driving a car in the dark without headlights.

It’s dangerous and potentially life threatening…

Sadly many are struggling with putting their own retirement roadmap together.

#3 Implementation/Forward Planning

Once you’ve done the hard work, it’s now about implementing. There’s no point in having a roadmap if you don’t implement it.

Nothing stays the same…your life changes…legislation changes…markets change.

There are so many variables changing all the time. You need to constantly review and readjust along the journey.

It’s the key to a successful retirement…

If you’d like some help putting your retirement roadmap together, let’s have a chat. Request a call emailing me at gdoherty@jigsawprivatewealth.com.au or request a call here…

We’ll discuss your retirement challenges and questions where you’ll gain clarity on your next steps. If requested, we’ll walk you through the three phases we use with clients to build your retirement road map. So you can retire with more confidence and clarity than ever before.

Glenn Doherty – CFP – Retirement Planning Specialist | Retirement Planning Made Simple for Over 55’s powered by Life-Centred Financial Planning

We work with people in Adelaide and around Australia via virtual meetings!

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