Nearing retirement and concerned
about current market conditions?

Michael Bailey, long-standing Investment Specialist at BT, shares some insights on how you can still enjoy a peaceful night’s sleep amidst the current market turmoil. In particular he looks at some strategies that will benefit those nearing retirement, such as diversifying your investment portfolios and understanding exactly what ‘long term’ means to you.

• Michael Bailey's 8 August 2011 update
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Long-term could be longer than you think

In the current environment of market turmoil it’s easy to get caught up in short-term volatility. But it becomes less important when viewed in the context of long-term investing. Remember that our investments have to work for us until the end of our lives, not just until the day we retire. So if you’re approaching retirement, it’s all the more important to really understand and define what ‘long term’ means.

Working out your life expectancy to determine what ‘long term’ means to you, and seeking the advice of a qualified professional, are critically important to understanding what you want to achieve. Don’t forget that your money may need to last for 30 to 40 years even as we near retirement – this is the real meaning of ‘long-term’!

As a rule of thumb, those nearing retirement need two to three years of available cash invested in defensive assets that are not affected by market volatility and that won’t require you to draw from your market-affected investments during bad times. “Ideally”, Bailey says, “you should be living off three years of saved income payments from your investment portfolio (amongst other things) and not selling your growth / stock market based assets unnecessarily at a time like this.”

Seek advice early

The best way to manage your pre-retirement finances is to see a financial adviser as soon as possible, and certainly well before turning 65, so you can maximise the benefits of a sound financial strategy. While it’s tempting to join the masses in ‘flights to safety’ to defensive assets such as term deposits and cash, it’s exactly at times like these when the time-tested investing principles of diversification and ‘staying the course’ still hold true.

Bailey emphasises that the case for getting proper financial advice is overwhelming. And that’s not just about investment advice about on whether you should invest in property today or shares tomorrow. It’s about strategic financial advice that will give you peace of mind and a long-term focus through difficult times. “You won’t need to sell your long-term growth assets if you have an advised strategy which includes sufficient cash holdings to meet your immediate needs,” he adds.

Finally, says Bailey, ignore all the sensation created by media headlines. Since 1960, the average one-year bounce from several severe stock market falls has been more than 30 per cent in both Australia and the US*. History has shown that there will always be a bounce back. So if you have a long-term strategy in place, think about the bigger picture and just turn off the TV.

In summary:

• Your investments have to keep working for you throughout your lifetime.
• Since 1960, the average one-year bounce from several severe stock market falls has been more than 30 per cent in both Australia and the US*.
• History has shown that there will always be a bounce back.
• The long-term direction of the share market has always been up.
• You don’t realise a loss unless you have to sell assets.
• It’s never too late to get financial advice.
• Remember your long-term goals and if you’re close to retirement it’s even more important to see a financial adviser.

*Source: BT Financial Group

The views expressed in this article are the author’s alone. They should not be otherwise attributed.

To find out more

Need a financial adviser or just want to talk through your options? At BT we can give you general and limited advice on how to invest. Or we can help you find a registered financial adviser who can help you with personalised financial advice. Just call us on 1800 104 800.

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