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There’s a common view that as youapproach retirement you should tilt your investment portfolio towards moreconservative investments. This means favouring things like term deposits,annuities and cash management trusts while reducing exposure to more volatileassets such as shares and property. The thinking is that preservation ofcapital is key, as without an earned income it is hard to recover from anydownturns in the share or property markets.

In the days of high interest rates thismight have been a good strategy, but when interest rates are low and lifeexpectancies long, being too conservative with investment can see the moneyrunning out way too soon.

Peter plans to retire on his upcoming 63^rdbirthday. He has $600,000 in super and wants this to provide him with an incomeof $50,000 per year. If his net return is 3% pa, Peter’s nest egg will last forjust over 15 years[1]. Theproblem is there’s a good chance Peter will live into his late 80s or even 90s.To give his savings a chance of lasting until he is 90 (27 years), Peter willneed to target a net return of 7% pa.

Chasing higher returns does involvetaking on greater risk. However, for a well-designed portfolio the greatmoderator of investment risk is time. Even over just a 10-year period it’s muchmore likely that a ‘growth’ portfolio will meet Peter’s needs rather than amore conservative one.

Just because you stop working doesn’tmean your money should too. To ensure your nest egg keeps working hard throughyour retirement talk to your financial adviser.

[1]Does not takeaccount of any age pension entitlement

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