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Protecting your retirement plan

Zac Ayoubi | March 2021

Article | 6-minute read

5 things to think about before you hang up your hat.

Retirement may be near for you, or perhaps a decade away, but ask yourself: does my current portfolio, and its resulting income, support my desired retired lifestyle?

It is common to feel unprepared for the transition from employment to retirement, not many of us think about it in great detail, but it is important to do so. Sometimes, people approaching their ideal retirement age worry about not having accumulated enough wealth to achieve the lifestyle they desire. They then feel the need to continue working to fund their nest egg.  

One thing that 2020 proved is how unpredictable life can be. Sudden market changes highlighted the importance of seeking financial advice and assessing how your retirement funds are invested.  Younger clients have time on their side to allow asset values to recover following a downturn but for clients closer to retirement, sudden market moves can have a significant impact, especially if this occurs in the later years.

Getting your retirement plan right, and starting early, can make the difference between a future of financial stress or one where you are secure in your savings - that’s where I can help. In the 16 years I’ve been working in the financial industry I’ve developed a passion for helping people plan their retirement, working with people in the lead up as well as throughout. Planning for retirement is an ongoing process that needs to change with your situation. By establishing a plan now, even if this evolves over time, you can set yourself up for a comfortable future.

Start planning now: It’s never too early

Receiving the right investment advice early on can help set you up for long-term success. When you first enter the workforce, retirement planning may be the last thing on your mind, but setting out a strong foundation is one way to create long-term financial wellbeing.

As you then get closer to retirement, the next consideration can be looking at your financial situation. As you reach your 40s or 50s, ask yourself:

  • What costs do I need to budget for before retirement?
  • How much debt do I have left to pay?
  • Is it more beneficial to add money to super or pay down my debts?
  • Do I have other significant costs to consider such as children’s education?
  • Do I want to help my kids out with a home deposit?

Asking these questions will help you work out your current financial situation, your financial goals and the time frame in which you can achieve these.

Preparing a realistic budget: How much do you need?

It’s difficult to know where to start when preparing a budget for your retirement. In my conversations with clients I find this is where people are most unsure. How can you know how much is enough?

A financial adviser can help you look at how much you’re currently spending before considering what costs you may not have once you reach retirement. Examples of potential costs that you may no longer have are: home loan repayments, commuting costs or extensive travel expenses.

Once you have a realistic estimate, your adviser will index this by inflation to give you a good idea of how much you’ll be spending once retired and then help you quantify how much will be needed for retirement and then work backwards to establish a clear pathway to achieve the outcome.

Evaluate your financial strategies: Break it down step by step

Building your retirement plan can feel overwhelming at the start. But when each step is considered independently, it can feel a lot more achievable. Start by reviewing your investments and ask yourself:

  • What strategies do I currently have in place?
  • Are these working for me?
  • Do I need to adjust these strategies to better achieve my goals?

These questions will help you learn about your current exposure, opening yourself up to new strategies that could improve your financial security.

For example, some people are unsure about entering the stock market as they see this as a risky investment option. I find clients are sometimes unaware of the level of exposure they currently have, especially if they are invested in the default investment option within their super. This default investment option could have up to 75% exposure to the stock market. Sometimes, this exposure to shares is far greater than what is suitable to them and sometimes it isn’t enough.  Being open to this assessment allows them to adjust and access alternative investment options that could better suit their goals.

Consider all your investment options: Don’t put all your eggs in one basket

Having a variety of assets when planning for your retirement is a good option, so as not to put all your eggs in one basket.

For example, people often ask me if annuities are a good investment. In my professional opinion they’re a strong starting point - catering for people worried about longevity or outliving their funds. Annuities offer a guaranteed rate of return and a set income and can be beneficial for clients that are eligible or close to being eligible to some Centrelink entitlements. Annuities generally provide income that you can’t outlive. The downside being that they offer no growth potential, returns offered can be quite low and they are very restrictive- you don’t have flexibility if your situation changes. Once established, the capital is locked and although exit could be possible early on in the contract, it can attract hefty surrender fees.

This lack of flexibility is why it can be beneficial to have a range of investment options. By combining annuities with superannuation, account-based pensions and managed investments, you’re able to have the security of annuities while also having the flexibility to access lump sums and ability to adjust ongoing income from other investment options.

Seek unique advice that reflects your financial goals

Everyone’s circumstances are different, and what works for one person may not work for another. Having a clear idea of your financial goals and preferred route for investing ahead of time is a good place to start when requesting financial advice.

Having worked in the industry for 16 years I am passionate about helping you achieve your financial goals - assisting with the identification of risks and suggesting options that will maximise your investments.

Planning for retirement is something that changes as your situation does, but even if your plans change, being prepared and making smart investments will set you up for the best outcome.

Financial advisers can work with you to keep growing your wealth by reviewing your existing plan, or tailoring a new one that’s as unique as you. Find out more and book an appointment

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This information is of a general nature and has been prepared without taking account of your personal objectives, financial situation or needs. Before acting on the information, you should consider whether the information is appropriate for you having regard to your objectives, financial situation and needs.

Zac Ayoubi is an ANZ Financial Adviser. ANZ Financial Advisers are representatives of Australia and New Zealand Banking Group Limited ABN 11 005 357 522, holder of an Australian Financial Services licence.