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Are you making the right investment choices for your super and pension?

Research shows only 32 per cent of Australians actively move their money around to get the best returns . While investing for the long term is fundamental when it comes to your super, a ‘set and forget’ attitude could cost you in retirement.

Investing your super

During your working life, your super fund will invest your money so it can grow, with most funds letting you choose from a range of investment options, from conservative right through to higher growth.

At this point, market volatility is the biggest risk to your investment. As a general rule, the longer you have until you retire, the more risk you can afford to take because you’ll have a longer period of time to recover from any losses. It’s important to check your current investment option and make sure it’s right for you.

Investing your retirement

If you’ve ever watched a professional cycling race or navigated your way down a long flight of steps, you’ll know there is as much skill in getting downhill safely as there is effort in getting to the top.

What most people don’t realise is just how important it is to get your investment strategy right once you’ve retired. A major market downturn in retirement can be devastating because it’s much harder to recover losses.

In retirement, market risk isn’t the only risk you face. Sequencing risk (the order and timing of returns) can also have a significant effect on how much money you’ll have to live on later on, so getting the timing right is crucial in retirement.

But you can’t be too conservative. Inflation risk and longevity risk (the risk of running out of money) are two other key risks to be aware of. Don’t forget, you could be retired for 20 years plus, so it’s important to ensure your savings are still growing and not being eroded by the rising cost of living. Re-balancing your investments regularly in retirement will help you manage these risks.

Market risk is new for many defined scheme members

If you’re a contributing member of a defined benefit scheme like SASS, a large part of your final benefit is based on a formula, and the majority of your money has been protected from market risk during your working life.

In retirement however, you become responsible for the full amount and you’ll need to decide how to invest your super to give yourself the best chance of having enough income for the rest of your life. Every scheme is different, so you’ll need to check how your particular scheme works.

Where will your retirement income from?

If you’re looking for a regular income in retirement, an account-based pension might be for you. Rather than receiving your super as a lump sum when you retire, an account-based pension allows you to receive pension payments monthly, quarterly, half-yearly or yearly, depending on the option you choose. The payments will continue until your savings run out.

As well as providing you with a secure and regular income in retirement, an account-based pension can be a smart way to keep growing your super, while protecting your capital at the same time.

Need help managing your money?

Getting expert advice can make a big difference to how prepared you are for retirement - both emotionally and financially. By discussing your lifestyle goals with a StatePlus financial planner you’ll have a much better understanding of the super and income you’ll need to make retirement a positive change in your life.

For more tips and tools, download our free Retirement guide or call us on 1800 620 305.

This is general information and does not take into account your personal objectives, financial situation or needs. It is important to seek financial and taxation advice that takes into account your personal objectives, financial situation and needs before making any decisions based on this information.