Retirement Planning – Investing
Building and securing your nest egg It's common for people to call their retirement savings their 'nest egg'. It's your accumulated savings that should get you through retirement and, hopefully, help you lead a comfortable, carefree life once you retire.
H
owever, it's best not to put all your 'eggs' in one basket and ideally, super should not be the only money you have or have invested in. Diversification is absolutely key when it comes to building your retirement savings, says Derek Armstrong, Principal and Financial Planner at Aged Care Financial Advisers. He explains that a lot of people look as superannuation as "guaranteed", however, that isn't the case. Superannuation can be subject to market fluctuations, just like any other investment. "The lifestyle [people] choose needs to be monitored, reviewed, like any good investment." "A lot of people leave it up to superannuation. But when you are looking at retirement, the whole thing about retirement is how can you generate income not to have to work,” says Mr Armstrong. "In that case, you have to start earlier, you diversify. You put away your 9.5 percent [into super], but also manage your debts or manage your cash flow."
Set the goalposts When you begin building your nest egg, you need to understand what you are working towards or trying to achieve in the first place before you can start setting any investment strategies. Mr Armstrong says the first thing any financial planner will do with a client
is figure out what their end goal is. If you don't have any specific goals, then you need to lock down how you want to spend your retirement and what that is going to look like. For example, if you are wanting to use $70,000 a year once you retire, you need to ascertain how likely that would be for you. Important things to consider are do you have debt in retirement? What about big expenses? Are you intending to buy a caravan or car? What about travel, has that been factored into your yearly spend? Some people just want peace of mind when they retire, but what does 'peace of mind' look like to you and how important is it to you? "When you look at your retirement savings, obviously, you have to look at where you are putting away money for the future," explains Mr Armstrong. "The longer you leave it, the harder it is to achieve those objectives… Time flys.
"Your timing, your debt levels, your cost of living, these are the major factors that present challenges for people. And then there are life issues such as divorce. In planning, you have the opportunity to look at how to address these things, then you have a clearer vision, which means your goals are probably achievable, but your goals need to be reviewed on a regular basis."
Timing Mr Armstrong adds that timing is really important when it comes to investing. “I would say when it comes to building your nest egg, where you are at in your financial journey will impact on the type of investment you make,” says Mr Armstrong.
Budgeting Budgeting is another big step for people when nest egg building. Budgets can help you figure out whether you are projected to reach YourRetirementLiving.com.au
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