How should I balance safe and riskier assets when saving for retirement?


It's only natural that younger people and older people will approach retirement differently. Your personal retirement strategy needs to move with life's ebbs and flows. Here's a few of the ways your retirement plan could change as you get older.

If you're fifteen years into your career and wondering if it's time to update your retirement plan, the answer is simple - yes! It's always a good idea to adapt your strategy as your life changes. There is no single blueprint that will fit everyone's life trajectory, but there are a few things that usually apply to people in different age groups.

In your 20s - less capital but more time

Twenty somethings are known for earning much less than their earning potential. But people in their twenties can benefit the most from compounding, so it's important to start saving at least 15% to 20% of your income towards retirement. The earlier you start, the less you'll need to put towards your retirement throughout your life, because compound interest will have had more time to benefit you (so essentially time will compensate for the extra capital you'd need for every year you delay saving).

But what kinds of things can younger people invest in for the long-term? Ideally, a properly diversified portfolio, perhaps with more listed property and equity. These can be risky investments, but as a young person, time is on your side! If there are any dips in the market, your investments should have more than enough time to recover.

In your 30s to 40s - more capital but more debt

You might be thirty and thriving, but your finances might not! You're probably earning more, but your debt and expenses tend to go up at this stage of your life. Some debt (like credit cards and loans) is expensive, so it's a good idea to pay those off. But amidst all of life's changes, it's important that you keep working towards retirement to make sure compound growth is on your side.

Making small changes to the way you use your money will lighten your financial load in the future. Try to be a disciplined saver, and remember - retirement comes faster than one thinks. Be consistent in sticking to your plan, and preserve your savings every time you move jobs.

In your 50s - more capital but less time

You're now approaching retirement and are probably becoming more conservative with your money. But you're also most likely at your peak earning potential, so it's important to stick to your retirement plan, save more by boosting it whenever you can, and always preserving your savings if changing jobs.

When it comes to investing, you can now consider moving more into less risky asset classes, like cash and bonds. But as people are generally living longer, you can benefit from leaving some of your retirement savings in equities for longer. This shift doesn't have to be sudden. It can be gradual and catered to your needs.

Just remember, your portfolio should probably not be 100% in cash and bonds - it's generally accepted that a minimum of around 30% of your portfolio should be in equity or listed property. Be sure to speak to your financial adviser about the right investment strategy for you.

In your 60s and beyond - more time and opportunity than you might think!

First up, if you're able to continue working, you can consider retiring later. This will give you more time add to your funds. Then once you have retired, understand that the change may be exciting, intimidating, boring, or even traumatic. As emotional as the experience can be, your retirement can still present you with opportunities for financial growth.

You will most likely opt for lower risk investments, but you're also at risk of becoming overly conservative with your money. Try to avoid this mindset, else you might lose out on growth. Rather, ask your financial adviser how to change your savings plan so that you can focus on the priorities you now have.

Now that you have an idea of what you can do to prepare for your retirement at different stages in your life, you can get started on the track to financial security. However, just as important as doing the right things, is not doing the wrong things! Read up on some common saving stumbling blocks to watch out for.

This article is not financial advice. Please consult with a financial adviser for financial advice.

Discovery Life Investment Services Pty (Ltd): Registration number 2007/005969/07, branded as Discovery Invest, is an authorised financial services provider. All life assurance products are underwritten by Discovery Life Ltd. Registration number: 1966/003901/06, a licensed life Insurer, an authorised financial service provider and registered credit provider, NCR Reg No. NCRCP3555. All boosts are offered through the insurer, Discovery Life Limited. The insurer reserves the right to review and change the qualifying requirements for boosts at any time. Product Rules, Terms and Conditions Apply. Discovery shall not be liable for any actions taken by any person based on the correctness of this information. For full details on the products, benefits and any conditions, please refer to the relevant fact file. For tailored financial advice, please contact your financial adviser.

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