Surprise survey results
Retirement Pulse question:
If you had $100,000 to invest which of the following would best describe your approach to the money?
- I would invest aggressively to achieve a high return, even if it involved a high level of risk. 5%
- I would invest using a balanced approach, accepting up and down investment returns over the longer term. 49%
- I would invest very conservatively and would be willing to accept low investment returns as a result.23%
- I would not invest, but instead would put all my money in the bank. 15%
- Other 8% with various responses including
- get advice first
- invest in a mix of conservative and balanced,
- buy blue chip shares,
- repay mortgage,
- make super contribution,
- take a holiday,
- buy a dream car.
So how might we interpret these responses in the most useful way?
Sometimes we find it easy to say we will do something, and then, in fact, do something quite different. For instance, research tells us that most retirees don’t necessarily invest in balanced funds, instead more often they seek the perceived safety of cash. Yet there is a clear majority of respondents to the Retirement Pulse survey who believe that a balanced option for the longer term made the most sense. It’s also worth bearing in mind that this question was possibly seen as referring to a windfall gain of $100,000 and therefore respondents were less risk averse.
Retirement Essentials Director, Jeremy Duffield, notes the risks that inflation and an overly conservative approach can present:
‘Everyone’s different in retirement. It’s important to find the solution that works best for you. People have different willingness and ability to take on risk to (hopefully) earn higher returns.
It’s an area where many will want to get advice…because sometimes the biggest risk in retirement can be being too conservative with your investments and not keeping up with inflation.’
The underlying question here, of course, is how do you choose the most suitable mix of investments for a retirement portfolio? As Jeremy confirms, there is no is one size fits all answer. And this begs a further question, whether investing in and for retirement is distinctly different from other life stages?
The avenues of investment are, of course, open to all investors, regardless of age. Some are riskier than others. We’ve all watched the meteoric rise and fall of crypto currencies over the past few years, which provides a high profile example of the more daring end of the scale. But the options of term deposits, local and international shares, property and indexed funds etc. can all form part of your investment mix – and probably already do if you have money in superannuation.
The traditional view of investing is that when you are younger it’s more appropriate to choose a balanced or higher risk setting so that you earn at a faster rate. And then, if things go pear-shaped, you have many years in which to earn and replenish your funds. And if you are retired, you choose a low risk setting as it can be more difficult to recover from sudden market downturns (i.e. you have less time to do so).
This view is questionable, however, as increased longevity means that today’s retirees may have another 30 years of retirement to fund. Investing with low risk settings may barely keep pace with inflation and deny retirees earnings which could have been much higher over the long haul.
The point here is that all investment options carry pros and cons. Investment decisions involve careful consideration which take into account the following:
- Your current financial situation
- Your age and likely longevity
- Your regular income needs
- Your financial goals
- Your risk profile (i.e. comfort level with risk settings)
- Potential Age Pension or tax implications
- Ability to access crisis funding if needed
So the work involved in choosing the right investment mix for you is two-fold.
The first step is to carefully review each of the above seven factors and how they might influence the type of investments most appropriate to your situation.
The second is to understand how this sits with your risk appetite and how you can reconcile these two things to ensure that your current investment strategy is meeting your main needs.
Once you have reached this point, you can step back, satisfied you have the right plans in place.
But not forever.
In today’s volatile financial environment, it’s important to review these settings at least annually. Things change, peoples’ needs changes and market returns change. Keeping your money management up to date is the most important aspect of a financially secure retirement.
Retirement Essentials can help with many key aspects of the above planning process. Our experienced advisers offer different tailored consultations so you can touch base to check your needs, understandings and plans for:
No mention of bonds in your article.
In times of high inflation bonds can be a very good investment with low risk & high returns. We about 9 mnths ago we’re in almost exactly in the position of the scenario in your survey & we chose quality bonds with interest & dividend returns of 5-7%
We came to Australia 23 years ago, me returning and my wife as an immigrant. We were penniless except that I had an old Falcon left in storage for about ten years. We both had jobs to start with probably slightly better remuneration than average for our joint gross income was about 105K. We lived on one income and invested the other income keeping in mind that people have to eat, use the banking system or to put it bluntly borrow a lot of money and thus work for the banks for thirty or so years. We bought shares in Woollies, Wesfarmers who owned Coles etc. etc. the NAB and Commonwealth Banks, BHP etc. Within eight years we owned our own home and two new vehicles and now those 23 years later we are retired and self funded without any monetary problems. That’s not bad for someone who was just on 60 years old back then and the trick is to never ever borrow money OR if you do borrow ensure that you have enough assets on hand to pay out the loan if interest rates go crazy as they do from time to time. The bottom line is simple and one of “if you cannot pay cash or have the assets to back your loan you go without until you do else you are working for the financial institutions.”
I will shortly be inheriting around $ 300,000
I am 61 years old and receive the full aged pension because my husband receives the Veterans Affairs gold TPI card and disability pension
I am fully retired and my super is still in accumulation mode
My question is should I deposit this money into my super account or in a term deposit generating 4 % annual interest
Cheers
Mandy
Hi Mandy, thank you for reaching out for help planning your inheritance. For you and anyone else who would like to have a discussion with someone they can trust about retirement we do offer financial advice consultations.
Our financial advice consultations are designed to help you better understand your options and the pros/cons of each so that you can take action with confidence. The consultation can be either online or via phone call, goes for up to 45 minutes and costs $150.
CLICK HERE to book now.
is it possible to have a face to face meeting
Hi Christian, thanks for seeking clarity! Currently we do not have a physical face to face service however we can do video calls so you get the same personal, face to a name assistance.
Not a very interesting article. More like a plug for business – like most of your articles.
Hi Mike, thank you for the feedback! We wanted to share the results of the survey our readers completed but will review how we can make the content more engaging in future.
we have sold our house trying to let centrelink know been impossible it sold for 291000 which i have put in our savings account and are renting not going to buy but still owe for car should i pay it out and any other debts then if i pay out the debts do i just let them know whats in our savings account bit confused on deeming etc cheers janet
Hi Janet, thanks for seeking further assistance! For you and anyone else who would like to have a discussion with someone they can trust about your options we do offer financial advice consultations.
Our financial advice consultations are designed to help you better understand your needs/goals and some of the actions you can consider to help you achieve those goals. The consultation can be either online or via phone call, goes for up to 45 minutes and costs $150.
CLICK HERE to book now