Why Retirees Should Consider Moving Away From ‘Safe’ Investments
Retirees are facing lower interest rates for the foreseeable future, with economic forecasts expecting a slow and prolonged recovery for the New Zealand economy post COVID-19. Still, many have not yet trimmed back expectations for their investment returns – and income.
With bank savings rates of less than 1 per cent and company profits hit by the pandemic, the reality is that it’s a very harsh market out there.
If you are suffering an income squeeze, it may be time to think long about moving a portion of your cash away from safe-haven term deposits and into other asset classes that offer better investment performance.
Shares or government bonds may be worth considering but equally, the search for higher returns also brings with it additional risks. It's a matter of weighing up how much threat to your capital you are prepared to take in order to maintain your current retirement income. If you are naturally risk-averse or are someone who has always parked their cash in a bank and never had to bother about risk, this is a major change.
When You Should Consider Enlisting the Help of the Investment Experts
If worrying about the market's volatility keeps you awake at night, it might be time to change tack and leave your investment decisions to the experts. We are able to recommend a raft of options that suit your personal circumstances. If you think you’d prefer more of a ‘hands-off’ approach with your investments, managed funds or annuities can often be suitable options.
Managed Funds
Instead of investing directly and doing it all yourself, we can invest in a managed fund where your money is pooled with other investors money and spread cross different kinds of investments.
With your money being spread across more investments than it would be if you bought an investment such as a share or property directly.
You can earn income from managed funds as well as getting capital gains when the value of your units in the fund increases.
There are many other advantages of these type of investments so contact us for some advice.
Annuities
An annuity is a long-term investment that provides you with periodic (typically fortnightly in line with NZ Super) payments for the rest of your life. They are specifically designed to prevent people outliving their income.
Purchasing an annuity can remove some of that longevity risk by providing guaranteed regular income for your lifetime, regardless of how investment markets perform or how long you live.
In short, if you are scared of outliving your retirement savings, you should be talking to us. Our belief is that one of the most important things is that you are not alone in your investment dilemma.
Speak with Foresight Financial Planning about your income needs and we can work out together what the best solution is for you and your circumstances.