retirementsuperannuationTimewise Financial Solutions

Setting up your retirement: finding the right super strategy

Have you teed up a sound superannuation investment strategy for your future? If you play your cards right, the money that you invest in super during your working life could set you up for a long, comfortable retirement.

Most of us can expect to spend up to 40 years of our lives in the workforce, and then another 25 to 30 years in retirement. As long as you are working, you should aim to have your super growing and at least keeping up with inflation.

It’s worth taking the time to shop around for the best super fund and investment options to suit your circumstances.

The right investment strategy for you

The most effective investment strategy will depend on your age, your goals for retirement and the length of time remaining until you can access your funds.

If you don’t plan to access your super for five years or more, focus on what it’s likely to be worth down the track. Don’t be distracted by the day-to-day fluctuations in value — think long term.

“Risky investments can really pay off with significant returns but the chance of failure is also larger. Can you afford to take big risks with your super savings?”

There’s a certain degree of risk involved with every investment. Super funds that invest mostly in shares and property are on the riskier end of the superannuation spectrum. The funds that invest mostly in cash or fixed interest assets present less risk. Most super funds take one of three distinct strategic approaches to investment: balanced, growth or conservative.

  • Balanced investment (Medium Risk)

These funds invest anywhere from 50% to 70% of your funds in shares or property, and the rest in cash or fixed interest. They tend to deliver reasonable returns compared to than high-risk growth investment options.

  • Growth investment (High Risk)

These funds invest anywhere from 85% to 100% of your funds in shares or property. While they tend to deliver higher average returns over the long term, in volatile periods, they can incur higher losses.

  • Conservative investment (Low Risk)

These funds invest anywhere from 0% to 30% of your funds in shares or property, and the majority in cash and fixed interest. These are the safest investments but they tend to deliver the lowest average returns over the long term.

How big is your appetite for risk?

To find the right super investment strategy for your circumstances, you must first assess your own capacity for taking risks. Risky investments can really pay off with significant returns but the chance of failure is also larger. Can you afford to take big risks with your super savings?

If you plan to retire and withdraw your super within the next five years, you probably want to have a fair idea how much money you’ll need to live on. In that case, the security of a lower risk, lower return investment strategy might suit you best. But if time is on your side, you can probably afford to adopt a long-term growth strategy.

Are you ready to rethink your super?

Most funds can tailor your superannuation investment according to your appetite for risk. Call or check your fund’s website to see the different investment options that are available to you.