You probably have some idea of what you want your retirement to be like. Maybe you’ve got a plan for where you want to live, what you’d like to be doing, and who you’d like to spend your time with. But do you know where your money will be coming from?
When it comes to retirement income, it can really help to have money coming in from more than one source. Here’s what you need to know.
Spread your eggs
If you’ve had anything to do with investing so far, you’ve probably heard that you shouldn’t “put your eggs all in one basket”. Diversification is a big help to lots of investors because it spreads their risk.
If you decided you were going to put all your money into one company’s shares, for example, and then that company hit trouble, you’d also be in strife. But if you spread your investments across a range of assets, one not doing so well isn’t such a problem.
The same applies to retirement income. If you’re drawing an income from term deposits, for example, and there are a few years of really low interest rates, it can be helpful to have other investments and income streams that could be performing better.
What are your options?
There are lots of ways to generate income at retirement. You might draw a passive income from rental properties or share dividends, maybe you invest in a business that continues to deliver you an income stream after you retire.
You might have a portfolio of dividend-paying shares or invest in funds with an income focus. Maybe you have a plan to draw down your KiwiSaver investments slowly over a number of years, as the markets suit, to keep a steady flow of income coming in.
There are numerous options and ways to mix-and-match them to create the best solution for you. What suits one person won’t necessarily be right for another. Of course, you are likely to also qualify for the pension when you’re 65, and many people opt to continue in some form of paid work for a while after the age of 65.
How to decide
The right way to invest to develop retirement income will depend a lot on your own goals and attitude to investing.
Some important things to think about include your time horizon and your risk tolerance: if you’re happy to handle a bit of volatility, you might opt for some higher-growth investments that will help your capital base grow while you draw down income in other places.
Most of us want to plan for a long and happy retirement, so it will be important to make sure that your investments are positioned to maintain you through that.
One of the best things you can do to set yourself up for a comfortable retirement is to get some great advice. As investment advisers, we can help you work out what you’d like your retirement income to be like, and what is the best way to achieve that. Give us a call to start putting your plan into action.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.