Retirees should manage their finances so their money can last the long-term. Investing after retirement is an option to continue growing your precious nest egg.
Reaching retirement is a milestone in anyone’s life. Years of hard work has paved the way for a rewarding new chapter with endless possibilities on the horizon. While this is a time to reap the benefits of your working years, it can also be a period of uncertainty.
Many retirees have the fear that they will outlive their retirement savings, while others still need to find some way of investing their finances to support their retirement years. If either rings true to you, read on for some helpful tips on investing after retirement.
Planning Your Investments
Now is the time to invest as wisely as you possibly can. One of the ways you can ensure your finances will last throughout your retirement is by going back to work or commencing casual employment.
However, if this is not possible, your other priority once you commence your retirement is to conduct a review of your existing portfolio.
You will need to look at how balanced your investments are and whether you’re exposed to any risk, including inflation and longevity risk. Additionally, are you going to look for a more ethical approach to investing?
From here you can think about how prepared you are financially and mentally when it comes to investing, what Government benefits are available to you, and if you have the option to open an account-based pension to enjoy regular income payments from your super.
If you are interested in investing after retirement into the stock market, it’s important to understand the business you are buying before you invest. It’s helpful to look at investing in a market area that you’re familiar with or become an expert in an area you are interested in.
Acknowledging what risks are and why they’re important when making investment choices is crucial, particularly as you reach retirement. Risks change depending on your investment timeframe, with short-term risks appearing more volatile than long-term risks.
Short-term risk is the risk that investment markets rise and fall at any given time. Long-term risk concerns include inflation risk and longevity risk.
Inflation risk is the risk that the value of your assets won’t rise enough to provide you with sufficient income you need in retirement. Longevity risk is the risk that you’ll outlive your retirement savings.
One of the best ways to measure these risks in retirement is through the Government Age Pension. Another risk that can impact your retirement savings is sequencing.
If you were to withdraw a large sum from your account at a time when markets are falling, you could create a permanent loss in your portfolio.
A way to reduce and manage this risk is by diversifying investments so that they are spread across a range of asset classes such as shares, property, fixed interest, and cash.
Working out how much you need for a comfortable retirement will help you to gain a clearer picture of how much you can afford to withdraw each year. Additionally, it will help you focus on your health and wellbeing.
You will need to work out how much money you need each month and then calculate an annual total income that you require to pay off your bills and to cover daily living expenses.
You can calculate how much money you will need in your retirement through an online financial calculator or by meeting with a financial advisor.
You should also look to see if your current investments are balanced in terms of the growth and safety of your capital and income generation.
Many of us are living longer, and the truth is that many retirees are in a position to devote more of their savings to investment and stock market strategies.
If you retire at age 65, general consensus says that you can safely afford to allocate half your assets in alternative investments and stocks, as well as a mixture of bonds and cash. You can easily adjust the percentages as you get older, to a ratio that you’re comfortable with.
Get Professional Advice
Seeking financial advice once you reach your retirement will help you to further assess your investment options, needs, and if you need something like funeral insurance. A professional financial advisor will help you to set your financial goals and assess any risks.
Meeting with a professional advisor will also help you to uncover how much it will cost you to live your preferred lifestyle, ways that you can control your costs, assess your risk tolerance, and discuss investment in retirement.
At times, maximizing your investments after you retire can seem overwhelming, but once you lay out the groundwork and seek professional advice before committing to any type of investment, you’ll be grateful for the time it took you to establish financial stability – allowing you to enjoy your retirement that much more.
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Author Bio – Sam is a full-time freelance writer who specialises in personal health, wellbeing and finance. Sam has been featured on websites like Seniors & The Pick.