Retiree superannuation advice

I am a retiree and my Superannuation returns seem too low

Rob and Sandra worked steadily as health professionals for 45 years and built a healthy nest egg. Now they have just started enjoying their retirement. They recently invested in a campervan and plan to take trips around the country living the grey nomad lifestyle. They understand that their investment choices are going to have a significant impact on the kind of income they can expect to generate, while not being part of the workforce.

When they were younger, they had happily chosen investment choices that placed them in an aggressive or growth focused risk profile. This led mostly to positive returns on their investment and it was satisfying to see their annual returns growing. As they got older and lived through the GFC, they thought it would be better to adjust their risk profile to be more balanced, and later, more conservative. Recently, with interest rates being low, they have been concerned about the low returns on their Super - even starting to eat into their own capital.

They approached Super Equity with a desire to improve the situation after hearing a friend explain their experience of a tailored investment strategy for their retirement nest egg.

Here are a few things to consider before you start...

What is risk profiling?

When you select your risk profile for your superannuation fund, you are telling the fund your preference for investments. For High Growth or Aggressive risk profiles, the fund may place your money in a high risk category (e.g. certain shares). High risk investments can be quite high, but can also increase/decrease in value dramatically in a shorter time. If, however, you indicate that you have a Conservative risk profile, the fund is likely to place your money in investments that have low but steady returns (e.g. fixed interest investments).

Many people treat Superannuation as a bit of a set and forget activity - filling in the forms and choosing their risk profile without much thought as to how investment choices are being made on their behalf through a managed fund.  However, your attitude to risk may change with market adjustments, trends and your own personal choices.

Once you have retired, you should monitor the market and adjust your risk profile to match your confidence in the market, to generate a healthy return on your investment.

Where does your retirement income come from?

While you have spent a large proportion of your working life diligently saving your money for retirement, that isn't the end of the story. In retirement, that money continues to have the potential to earn more money. This is where your investment strategy of your superannuation savings becomes important. While you need to balance the risk of investment choices, professional advice on how to invest your money in retirement can really help you to maximise the income you generate from your hard-earned retirement savings.

Other than your superannuation, retirement income may come in the form of Government Age Pension although this will be dependent on your eligibility conditions of age, residential status, income and assets tests.

In early retirement some retirees may choose to continue working in a part-time capacity.

Besides a dollar income, another way that retirees can manage without an ongoing work-income is to apply for a concession card or a health card that is particularly helpful for less costly health care, medicine and transport costs.

When it comes to your superannuation however, it is important to "make your money work for you" as the saying goes! So speak to Super Equity about making the right choices for your retirement savings and maximising the income you receive in retirement.

Why do investment returns play such a big role?

The Australian Bureau of Statistics data indicates that the average age most people plan on retiring is around 65.5 years. If most people start working around 17-18, that's a working life of around 45 years. Time in which you have earned money on and off, taken time out for babies, invested in large assets like a house and cars and taken lovely holidays, paid for medical treatments, cared for your loved ones, invested in an education and so much more! Money has flowed in and out of your hands over those many years and ideally, you have saved up enough to see you through your retirement of 25-30 years after finishing up full time work.

When you consider all the expenses that go into our lives, it is no wonder a common question for people to ask is "How much money do I need to retire on?". Once you have retired, however, a better question is "How do I make my retirement savings last?". The answer to this is investment returns!

Many retirees take a conservative outlook thinking that it's better to play it safe with the final superannuation savings they have in their account. The reality is that they may be missing out on the chance to achieve higher returns that continue to grow the nest egg, rather than continuously reducing it.

Whats right for you?

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