Everyone wants to be wealthy, but it's not always clear how to get there. There…
While financial planning seeks to prepare you for financial setbacks, it does come with many risks. After all, no one can certainly predict what the future holds. That is why retirement financial planning always includes planning for uncertainty.
In Australia, every employee has superannuation. It is an organisational pension program designed to be a tax-efficient and long-term investment. It involves investing your money in assets like shares and managed funds and growing them until your retirement day. This type of account prepares everyone for the uncertain future.
Playing in an Unpredictable Market
Because of the pandemic, the economy has experienced instability over the past year and a half. This has greatly affected people’s investments, including everyone’s superannuation status. When put in this situation, most people pull back their investments, fearing that their money would lose its value and taint their investment portfolio. Investors think that the safest way to manage their retirement money is to take it out of the falling drain before it fully empties.
However, if situations like this happen again, it’s best to evaluate your options. Your retirement fund might end up in danger whenever you make rash decisions. When the time to retire comes, some may not even have other sources of income, making them uncomfortable with the idea of their investments dipping. That leads them to decline any additional risk that they might encounter if they decide to continue investing.
Thinking About Going Big or Going Home?
While these moves are understandable from the investor’s perspective, this may not be the best approach from a financial adviser’s point of view. When people pull out their investments, they usually do so when there is a market downturn.
Meanwhile, deciding to stick to it will not always give a guaranteed rewarding experience. Still, you could potentially have the chance to redeem your investment once the market stabilizes. There is no definite timeline for this.
Nonetheless, the market will eventually make a turn, and the economy will thrive again. Missing that opportunity would mean failing to recover your lost investments. Unfortunately, once you decide to take your investment out, you may lose significant opportunity costs to restore your portfolio. Oftentimes, you will need to explore other investment options to raise your nest egg back to its original value.
It is so easy to get distracted, especially when many factors depend on your investment portfolio. Since an investor’s perspective is limited, they cannot always see the bigger picture. That is where financial advisers and retirement financial planning comes in. When you regularly check your investment and discuss it with your financial adviser, they can give you a better insight into your possible choices and the consequences of each action.
If You’re Having Second Thoughts, Talk to Your Trusted Financial Adviser!
During these challenging times, Newcastle Financial Planning Group is here to help our clients find the best financial move they can make for their investments. Financial planning means regularly evaluating your asset allocation and ensuring that everything still aligns with your financial situation, financial goals, timelines, and preferred risk appetite.
Investments always involve risks, from market risk to inflation risk, longevity, and even emotional risk. How you work around these risks will depend on your priorities and preferences.
To know more about tips in managing your finances and building your wealth, check out these posts:
- How to Prepare for Life’s Curveballs Through Retirement Planning
- How to take control of your finances in a post-COVID world
- 4 examples of how you can maximise the value of your financial advice
Need professional help for your retirement financial planning? At Newcastle Financial Planning Group, we ensure that our clients are retirement ready and can focus on enjoying the wealth they have accumulated through our sound retirement advice. Contact us today to get your path to early retirement started.
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.