Investing for your retirement so you can retire with full confidence

Ding…an email had just arrived in my inbox. A response from one of my recent posts…

A guy looking for the best strategy when investing for retirement…

From the email, I gathered he had done pretty well in his investment journey…

Stating that he thought the large super funds in Australia had underperformed.

Underperformed compared to what I was thinking…but we’ll let that one pass through the keeper for now.

He was obviously unhappy with the performance he was seeing generally in super.

Not only that, he hadn’t found an adviser that could deliver on his return expectations…

To be able to grow a portfolio in good times and protect a portfolio when there is volatility around.

It’s kinda like asking a fitness expert to show me everyone who got a sick pack from your program.

Without understanding where they are at in their journey. Their experience and what they are looking to achieve. It serves no purpose.

It’s all about context…

There was nothing in his email about what he wanted out of retirement, I was thinking to myself.

Was his whole focus on Return on Investment or Return on Life?

While I admire this guy for taking such an active interest in his finances. Many don’t…

Sadly, this is where I see many get it terrible wrong. The pursuit of the best returns year in year out can kill your retirement dreams.

If you’re trying to consistently get a better return than the market delivers. Your on a hiding to none…

The research backs this up. While professional fund managers might be able to do it for one year. The majority don’t over a longer period of time.

If the pros struggle with it, you’re definitely going to struggle with it.

Let’s look at where most get it wrong and what you can do about it.

So, how do you create an investment strategy for your retirement? One that can help protect your money. While enjoying a stress free lifestyle in retirement.

We discuss the blind spots and what you need to take into account when investing for your retirement…

Investing for retirement – Does high return mean high risk for your retirement?

If you are in one of the large super funds in Australia, one of those top performing ones…

It may not be good news for you.

While achieving a great return on your super makes you feel good. It may be setting you up for a BIG fall in retirement.

For the most part, most of these top performing super funds perform well because they take on more risk.

I’m sure you’ve heard the old saying, “high returns equal high risk” before.

High return means they have to take a high level of risk to achieve that high return.

This leads to one of the biggest risks pre-retirees and retirees face. A risk that workers in their 20’s, 30’s and 40’s don’t need to worry about.

Sequence of return risk…

This risk is greatest leading 5 years into retirement and your first 5 years of retirement life.

It’s the order in which you receive your investment returns.

Good returns leading into retirement and it’s happy days for you…

Bad or even worse large negative returns leading into retirement means it’s bad news for your retirement.

Murphy’s law says, the minute you retire, you’ll experience bad investment returns.

Do you have any idea of how much risk your super fund is taking?

Have you got enough safety margin to withstand a market downturn for a number of years?

The reason a lot of these funds are high risk for retirees, is they are built for everyone.

It’s fine if you’re a 30 year old professional with another 30 odd years in the workforce.

But not so dandy for a 60 year old within a few years of retirement.

That’s how most super funds roll. They throw you in with the 30 year olds and invest the same way…

Now that’s fine if you don’t mind the odd heart palpitation every now and again in retirement.

But if you don’t, you need to act before it’s too late.

Get your PDF copy of ENOUGH? here…

Asset allocation is the secret ingredient when investing for your retirement…

Over the years, we’ve seen it all…

As the Global Financial Crisis (GFC) hit, I had recently joined a large financial practice as a part owner.

We’d just taken over clients from a retiring adviser that had been in the financial planning industry for over 20 years.

One thing was evident, they were old school…

Adopting a product first approach.

One client I met during the onslaught of the GFC has most of his life savings in property trusts.

When I saw this client for the first time his portfolio was down some 40%, a drop of some $300k.

As you’d expect he was devastated…

But today, we still see the same costly mistakes being made time and time again.

In the pursuit of growing their retirement nest eggs. People take on way too much risk without understanding the consequences.

Leading to worry and stress in retirement.

One such mistake is investing your whole retirement life savings in one asset class. Such as Australian shares.

Sure, it might make you feel good. You might even look like a superstar one year.

But when the share market has a big fall, those heart palpitations are going to come hard and fast.

At the time of writing this, many are having those heart palpitations as we speak…

With a little care and knowledge it doesn’t have to be that way.

It’s great when you’re making easy money, but beware when it starts to bite you in the rear end.

You have two choices:

#1 Maintain a hope and prey strategy.

Or…

#2 Use all the evidence to invest with confidence and peace of mind.

There is a mountain of research about how investment returns are generated…

While individual stock picking can be a little like finding a needle in the haystack. Let’s not forget, it’s the sexy side of finance.

The main driver of your investment returns is your asset allocation. The amount you allocate to Australian shares, International shares, Property, Bonds and Cash.

What’s your investment approach?

Do you know how it may affect your retirement lifestyle?

Is your current investment strategy setting you up for failure in retirement?

You may also want to read “7 Key Ingredients For A Comfortable And Worry Free Retirement”

A better way to invest for your retirement…

By now you’ve built up a decent nest egg and probably taken some risk along the way.

As you approach retirement you become more anxious. You worry more about what investment markets are doing.

The impact of bad investment decisions at this stage in life can be devastating for your retirement lifestyle.

After all, before too long you’ll be retired and relying on income from your nest egg for the rest of your life.

But ultimately you’re trying to work out if your money will last the distance in retirement.

Three components that will guide your investment approach in retirement…

#1 The retirement lifestyle you want to live and the cost of that lifestyle…

From your daily living, completing a big lap of Australia, overseas holidays and new cars to name a few.

Ultimately this comes down to knowing your cash flow requirements and how this will look over your retirement years. Based on the financial resources you have.

If you get this number wrong on this or get it wrong the beginning there’s definitely going to be trouble later on…

You may also want to watch “Is $2 million enough to retire comfortably in Australia?”

#2 What investment return do you need to safely fund your retirement income for the rest of your life?

This is one question most retirees don’t know, let alone understand…

Working with pre-retirees and retirees on a daily basis. For the most part most don’t need to take the risk they were when working.

It’s critical to your retirement lifestyle that you base projections on conservative numbers.

I can’t tell you how important this step is.

Sadly, many have no idea let alone know how much money they need for a comfortable retirement…

#3 What investment strategy do you need to adopt to achieve that investment return?

It’s working out how you need to allocate your money between shares, property, fixed interest and cash assets.

With a decent safety margin to protect your retirement income when the market goes down.

Knowing that you are going to need your money to last for 20 to 30 years or more. You still need to take some risk with your money. There’s no free lunch…

This is another important area pre-retirees and retirees get wrong. They find it hard to put all the pieces together.

The goal is to ultimately accumulate it, maintain it, protect it and ultimately ENJOY IT…

But most have no roadmap to guide them.

Return on Investment vs Return on Life…

I’m not going to get all airy fairy here, but there’s an important point to make.

Imagine for a moment you’ve lived your life and you’re in your box reflecting on the life you’ve just lived.

Are you going to be lying there smug about the investment returns you made?

Or…

Are you going to be reflecting on the experiences you’ve had over your lifetime?

You see, the return on your investments is important. But only to the extent it helps you live your best life in retirement.

Maybe that’s to complete the big lap around Australia in your caravan…

Explore all those overseas countries you never had time to visit while you were working…

Spend more time with family and friends…

Help your kids out financially…

Enjoy nice restaurants and a nice bottle of wine without worrying how much it costs…

Retire early…

Whether it’s a BIG lifestyle or a LITTLE lifestyle.

Everyone’s retirement is different…there’s no one size fits all solution.

Once you know the lifestyle you want…my guess it’s not less than what you have now.

You can work out how much money you need for the rest of your life.

Once you know your numbers. This will guide every financial decision you need to make with a greater level of confidence. While giving you the peace of mind that you’re going to be okay…

Life’s not a rehearsal…

Are the actions you take today leading towards the lifestyle you want without fear of running out of money?

If you can’t answer that question, maybe it’s time we had a chat…

It’s easy. You can book a complimentary Retirement Clarity Call with Glenn on the calendar below.

Glenn Doherty – CFP – Financial Planner | Retirement Planning Made Simple for aspiring grey nomads and avid travellers within 7 years of retirement 

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

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