Help. I was looking to retire in 5 years….

 

The coronavirus outbreak has led to share and property market declines, and therefore has led to an increase in sequencing risk.

What is sequencing risk?

When an investor experiences poor performance at precisely the wrong time in their investment journey, leading to a massive impact on their wealth and their ability to retire, and/or their ability to maintain a certain quality of lifestyle in retirement.

At this point of Covid-19, if you are around 60, you’re probably asking yourself some pretty unsettling questions:

  • Can I still retire when I had planned?
  • Will I have enough to retire?
  • Will I have enough to last throughout retirement?
  • What do I do?

If you haven’t already, now is a good time to do a realistic retirement-needs analysis:

  1. Estimate how much you plan to spend each year in retirement.
  2. Compare that to how much income you can reasonably expect from your accumulated wealth/superannuation.

          A good example is for every $100,000 in superannuation, you could expect to receive $5,000 – $6,000 per annum, and not be depleting the account balance (in theory).

If you appear to not have enough wealth accumulated, you may have to make some difficult decisions. Such as:

  • Do I spend less money in retirement and live a lesser quality life?
  • Do I work for a few more years than I had previously planned to build the required wealth?

Do you have wealth boosting strategies to consider to make up the difference? Have you considered:

  • Additional superannuation contributions via a Transition to Retirement strategy. (ie same take home pay / more in super)
  • Additional superannuation contributions by an improved spending plan.
  • Improved investment returns by making a calculated adjustment to your risk profile
  • Improving on the cost efficiency of your superannuation/investment administration fees
  • Other tax minimisation strategies

By implementing some (or all) of these above listed strategies you may be able to make up the difference between where you were heading pre Covid-19 disruption and now.

I’d love to have a 15 minute chat to help steer you in the right direction. Feel free to book in a time in my diary here.

Or give me a call on 0458 130 079.

Thanks for reading.

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