Getting your money working when you’re not

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Financial adviser and author Helen Baker lists the key things you can do to ensure your money is working hard to support you in retirement.

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In retirement, it’s normal to wonder if your money is working hard enough for you. We are constantly bombarded by financial news and all this analysis can lead you to wonder if you’re missing out on something. “Am I taking advantage of the interest rates? Should I find something that pays better dividends?” and the dreaded, “What’s my legacy going to be?”

It’s important to filter out information that doesn’t apply to you, or needs a bespoke retirement approach.

Take low interest rates for example. Low interest rates are great if you want to borrow to invest, buy a house or start a business. But is that you? For retirees, low interest rates are a good way to clear debt or if you are a pre-retiree refinance existing investments to boost your cash flow.

But any investment decision carries risks, and if you lose money in retirement it’s hard to replace. Everyone’s appetite for risk is different and depends on your individual circumstances.

There are a few key things to you can do to make sure you’ve spread your risk and your money is working hard to support you.

1. Get financial advice
A financial adviser can help you manage or invest your superannuation and other investments, maximise your tax and government incentives and help you develop long-term budget and investment strategies. Visit the Financial Planning Association website to find an appropriately qualified adviser and check you are getting all tax deductions related to service fees and commissions.

2. Diversify your investments
Diversifying your portfolio can help manage the risk of investing by ensuring your interests are spread across a range of asset types and industries. Some investments carry lower risks and lower rewards, while others have a higher risk and reward. There may be options for diversifying within your super fund and you can also look outside your super for other types of investments such as managed funds. There are many options and it can be daunting, so weigh it up and discuss the options with your financial adviser.

3. Know your entitlements and tax incentives
Unless you’re familiar with the language of government and taxation, this area can get overwhelming. A good financial adviser will help, but doing your own research is also important. The seniors card can be a handy cost saver, and there are services to help you pay bills or supplement carer fees. If you’re over 55 and not retired, look into a transition to retirement strategy, which can supplement your income with your super.

There are several government benefits for health-related expenses. Have a close look at your private health cover and make sure it suits your needs. The same cover you’ve always had may not be working as well for you any more.

4. Interrogate your investments
There are many options when it comes to retirement-friendly investments. All need thorough research and you must know exactly what you’re getting into. While property is often thought of as the go-to investment for wealth creation, in retirement it can be risky. Tenants who don’t pay or market fluctuations can definitely throw a spanner in the works and you can’t sell off a bedroom if you need some money to travel. Term deposits are a good way to keep cash accessible, but the interest rates now are small compared to property or shares. Blue chip shares will earn you some money and there are tax incentives. But like everything there are risks, which is why diversity is key.

Managed funds can be a good balance, but again, do thorough research. Look for funds with diverse investments. Having cash is a day-to-day necessity, so consider investments that pay dividends with franking credits.

5. Work part-time
The work bonus is a government incentive to encourage people to work past the Age Pension age without reducing the pension. Working will help you preserve your super and, in many cases, could also benefit your mental health.

Retirement is about protecting what you’ve built. Being too conservative with investments could send you backwards, but risky investments can hit hard when they don’t pay off. By taking the time to understand what your money is doing and developing a solid strategy to get it working harder, you can make your retirement a stress-free one.

Is your money working as hard as it should be for you? Are the low interest rates causing you concerns?

Helen Baker is a licenced Australian financial adviser and author of two books: On Your Own Two Feet – Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce – Your Survive and Thrive Financial Guide. She is among the one per cent of financial planners who holds a master’s degree in the field. Find out more at www.onyourowntwofeet.com.au.

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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