Wealth

Case study: setting up for retirement

Discover how Melike built her retirement nest egg in her fifties.

Melike was 53 when she decided to get serious about her retirement savings. Here’s how she worked with a licensed financial adviser to develop an investment plan in line with her risk profile.

Planning for a comfortable retirement

Even though retirement is still more than a decade away, Melike knows she needs to put the right strategies in place to be able to afford a comfortable retirement in her sixties. She currently has a superannuation balance of $170,000 and is in the fortunate position of working in a relatively secure industry, but she needs help to reach her retirement goals.

Understanding your risk appetite

Melike has been burned by bad investments in the past and, as a result, she considers herself a conservative investor. Using this knowledge, her licensed financial adviser developed a strategy that helps to minimise her risks and allows her to build her assets before and even after she retires.

Balancing risk and reward

Together, Melike and her adviser reviewed her lifestyle, to work out how much income she would need when she retires. Melike explains that she could take on some risks to build her wealth, but not is not comfortable with the prospect of risking all her capital. Using her superannuation nest egg, Melike’s adviser recommends:

Some exposure to the equities market. This is higher risk than cash or fixed-interest investments, but it also has the potential for greater rewards — Melike’s 14-year time frame suggests she could ride out potential market volatility. Her adviser recommends the Platypus Australian Equities Fund, which gives her a diversified equities exposure and the potential for above-market returns.
Some savings be allocated to a bond fund, such as the Altius Bond Fund, which aims to generate regular income with low capital volatility. This has a lower risk profile compared to Melike’s equities investment, is a good source of diversification, and acts as the defensive component of her portfolio to protect her wealth through market cycles.

A young woman and an older woman enjoying lunch together

Checking in — to make sure you stay on the right course

For Melike, putting the right strategy in place to build a nest egg has given her peace of mind. “I look forward to my annual reviews with my adviser,” she says. “We analyse my investments’ performance and make sure it’s still appropriate for me as I get closer to retirement.”

Tips for preparing for a comfortable retirement

Your fifties can be an important turning point in your wealth-creation journey. While everyone’s situation is different, the below tips may help you identify strategies that could build your wealth for your retirement years.

Tips to help you build wealth before retirement

Get appropriate financial advice

An experienced and licensed financial adviser can help you work out your investment goals and put in place a strategy that helps achieve your objectives over time. An adviser will consider your risk appetite and balance this against your goals, to find an investment strategy you feel comfortable with.

Take on some risk to build wealth

Melike acknowledged that, while she is conservative, some risk was needed to grow her nest egg. An investment strategy can be adjusted as you get closer to retirement age, reducing your exposure to market volatility to help preserve your capital.

Ride out market cycles

Some exposure to risks makes sense while you’re still working and can continue to add to your retirement savings, as this gives you greater capacity to ride out market cycles. If markets are volatile, you can use your income to help rebuild from any losses.

Diversify your assets

Allocating some of your assets to defensive investments such as bonds can also protect your portfolio through market cycles. For example, you might move a percentage of your nest egg from a high-growth investment to assets such as cash or fixed-interest investments.

Gain even greater control through a Self-managed Superannuation Fund (SMSF)

A SMSF is a private superannuation fund that you manage yourself. It is an option if you have built up a substantial retirement nest egg and want direct control over how your super is invested. The success of a SMSF relies on your investment strategy and adherence to strict ongoing compliance requirements.

Plan a retirement income

While your investment strategy may favour capital growth in the years leading up to retirement, your asset allocation will likely shift to favour income-producing investments as your retirement date draws near. These investments reduce your risk exposure and, importantly, help you to maintain your lifestyle by providing a reliable income stream.

Important information

Any case studies, testimonials statements, names, performances, examples or any other information provided are for illustrative purposes only. We cannot guarantee that you will achieve the same or similar results or outcomes. The information provided is general information only and does not take into account your individual objectives, financial situation or needs. Before deciding to acquire any product or service mentioned, you should make reasonable enquiries, read the applicable disclosure documents (such as financial services guides, terms of use and conditions, fees and charges and the relevant Product Disclosure Statements), which are available via the links provided or from our website and seek professional financial, legal and tax advice. You may also request a copy of any of the applicable disclosure documents. For more information, please contact us .

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