4 ways to manage risk in retirement

4 ways to manage risk in retirement

Rod Dickinson

Every investment comes with some level of risk, but as you retire, it’s wise to minimise risk as much as possible. After all, the time for making up for risky investments with extra income has passed, and your strategy now is to hang on to as much of your super as you can, so it can serve you well for many years.

Australia’s superannuation system is still young, and the current generation of retirees are guinea pigs in some ways. Still, we’ve had time enough to learn a few valuable lessons about managing risk as part of your retirement planning.

Avoid trial-and-error investing

We often think of risk only in terms of stock market volatility, but there’s another aspect to risk that you should be aware of: trial-and-error investing. Few of us have time to learn as much as we need to in order to invest skilfully for our retirements. This is where it helps to get the advice of a skilled financial planner. With an experienced and educated financial adviser, you can avoid the risks of investing by trial and error. Once you’re in your retirement years, there’s simply no time for learning this way. Your number one priority should be to keep as much as your savings as possible.

Withdraw as little as possible during downturns

Stock prices ebb and flow, and we have to expect that markets will not remain constant during retirement. However, there are things you can do to minimise losses due to downturns. For example, you can limit the amount you withdraw from your super during these times.

When you take out money during a downturn, there’s less money left in your super to participate in the market’s subsequent rebound. This is the same idea as “selling low.” Do all you can to avoid selling low, and you’ll lessen your risk.

Diversify your investments

Diversification of investments is as important during retirement as it was while you were working and contributing to your super. A balance of low and high-risk funds can help you to avoid the ravages of inflation while still maintaining an overall lower risk portfolio. Your financial adviser can help you decide on the idea balance of low and high-risk funds or stocks, based on your individual retirement plan and other factors such as longevity, pension, and aged care costs.

Consider your fees

Some investing fees are substantially higher than others, and fees can eat up your savings in a hurry if you’re not careful. If you have several different super accounts from several previous employers, you may want to consider consolidating them so you have fewer fees to pay. Your financial adviser can steer you toward funds that offer lower fees.

With careful risk management during retirement, you can help your super to last longer and serve you better during your golden years. For more information about managing risk in your portfolio, contact us at Altus Financial.


The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice or its related entities. This information is general in nature and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. To view our full terms and conditions, click here.

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