Sub category: Superannuation
30 June 2015

Time to diversify? Why it’s becoming more important to grow your super

A diverse investment portfolio can assist you in growing your superannuation, as well as help protect your wealth in the longer term.

Super is an investment which has been designed to support us in our senior years. However, our increasing life expectancy may be a trigger to rethink our super investment strategy so that we have the resources to sustain us post-retirement.

A one in four chance of living to age 90

A recent report by ASFA/State Street Global Advisors (The future of retirement income, March 2015) found that a 65-year old women can now expect to live, on average, for another 22 years while a 65-year old man could have an average of another 19 years ahead of him.

The study also noted that among today’s 65-year olds, around 40 per cent of woman, and 26 per cent of men, will live to age 90.

A long life is worth celebrating, but it also calls for some planning in terms of making your retirement savings last the distance.

Key considerations

The investment choices you make may be influenced by a number of factors. These include your appetite for risk as well as your stage in life.

For example, if you are just starting out in the workforce you may be open to choosing higher risk, higher return investments – because you have time on your side when it comes to building your super. If you’re nearing the end of your working life, you may find it appropriate to invest a higher proportion to more conservative, lower risk investments.

Yet while people tend to focus their investments in traditionally conservative assets as they approach retirement, such as cash and term deposits, our increasing life expectancy means Australians may find it more desirable to hold a more diverse range of investments for longer.

Don’t switch to a conservative portfolio too soon

According to the aforementioned research by ASFA/State Street Global Advisors, retirees with a ‘defensive’ portfolio – in other words, where a good chunk (75%) of their money is invested in cash and fixed income assets, could expect their savings to last until about age 90.

However if the same retiree held a more diverse portfolio – with just 43% invested in cash/fixed income and the remainder spread across a variety of growth assets including shares, the same pool of wealth could stretch until age 98.

These are simply examples; nonetheless the key message is clear. One of the most effective ways of making your super last longer in retirement is by spreading your nest egg across a variety of investment options.

Playing it too safe by making an early switch to low return investments and overlooking growth assets could increase the risk of being left shortchanged later in retirement.

If you are thinking about diversifying your investments, consider asking your financial adviser to assist you in making the right choice.

The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Home and Contents Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.

Related articles

Future Proof
Loading...
Share
Loading...
XS
SM
MD
LG