Have a structured plan

Without a work income, outside of any National Superannuation entitlement, you rely on your retirement savings and investments to generate and provide a steady income. So, you need a well-designed plan to weather short-term market fluctuations while ensuring the preservation and growth of their investments over the long term (to outpace inflation).

Plus, having a structured plan can help you stay on track with your goals and objectives. You need to consistently review where you’re at and how your investments are performing, to ensure you don’t fall behind.

Consider a mixed investment horizon

Many people view retirement as the destination, but it’s actually a journey in itself, and potentially a long one at that. With the average retiree spending 20-25 years in retirement, you need a nuanced approach when it comes to managing volatility over time.

There are different strategies to do that, one of which is the ‘bucket’ (or cascading) approach. Here’s how it works:

  • Divide your retirement funds into multiple imaginary ‘buckets’, based on their investment horizon – short term, medium term and long term.
  • Invest each bucket according to its own timeline – for example, the money you need within the next three years could be held in cash or term deposits, while the funds you plan to use in the following three or four years might be invested in low-risk or balanced funds. Anything beyond the seven-year timeframe could be invested in growth funds.
  • Reassess and adjust at least once a year, gradually de-risking portions of your portfolio as you move through retirement.

Essentially, the ‘bucket approach’ allows you to have three (or more) investment horizons ticking along at the same time. It can be the nuanced strategy you need to make your money go the distance.

Other risks….

Market risk isn’t the only risk you need to be aware of when it comes to managing your retirement finances. Click the links to learn more about some of the other risks you should be aware of: inflation, longevity, diversification and sequencing risks.