The Press - Martin Hawes - 23 May 2018
The toughest thing in all of finance is to take a lump sum and turn it into a steady, dependable income.
Retirement means going from having a paycheck every second Thursday to investing your savings to live on, and that's not easy.
Income from savings to live in retirement is hard because the economy may do anything over the 20 or 30 years of retirement. We may have inflation, deflation, recessions, a depression, a credit crunch etc.
Financial adviser and author Martin Hawes believes KiwiSaver is a tool people can use after they stop work to help turn their nest eggs into retirement income.
Markets are always uncertain and volatile, and, into the bargain, interest rates are likely to be low for the foreseeable future.
The days of solely investing in bank deposits are gone.
Variable, volatile returns and low interest rates make for a difficult mix when you need reliable income.
The right response to this is to have a properly diversified portfolio spread across different asset classes around the whole world of investment.
The portfolio needs to have the right amount of risk for the retiree: not too aggressive but not too conservative either. The first step for any new retiree is to complete a "risk finder" questionnaire. There are plenty of these on-line.
This should give the right mix of investments with some shares, property trusts and bonds that will give better returns than one made up simply of bank deposits and the likes.
Spreading your money around will also mitigate some risks, for example, owning some property trusts or shares will help in times of high inflation. Bonds will do well through a major recession.
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