Switching strategies may lead to a risky retirement
In protecting their capital in retirement, investors need to consider the concentration of risk in any new investment strategy they take on, according to Wingate Asset Management chief investment officer Chad Padowitz.
Sequencing risk is having an even greater impact on retirement savings as Australians live longer, but the belief in an 'investment reset' at retirement can lead to poor performance over the long-term.
"The capital risks of equity investments have been brought to investors in recent years - especially those who are about to retire - as many have seen erosion of their superannuation," he said.
"When stock markets suffer large declines near or during retirement, the impact on future income because a retiree ends up with less capital to invest can be significant."
Despite this, Padowitz said investors should be focused on maintaining a balanced portfolio, as a switch to low-return assets may lead to long-term risks.
"With equities, retirees should ask themselves whether now is the right time to be selling, especially with the risk of further cuts to interest rates and the impact this has on cash returns," he said.
"It may provide adequate pension income in the short term, but be unable to support changing needs throughout retirement."
AUTHOR
Staff Writer
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