COVID-19 has taken its toll on Australians all over the world, both personally and financially, and it is the retirees in particularly that need to avoid making some serious financial mistakes that they may not be able to recover from. With most financial markets having declined since the start of this year, we are seeing the same personal finance mistakes made as during every other correction.
This week we’re sharing some top personal finance tips for retirees, and even those who are just a short period off their ‘golden years’ to avoid financial disaster.
1. Avoid Panicking into Cash
One of the most common moves that we are seeing many retirees make when it comes to their superannuation or their investment portfolio is switching their assets into cash and cash-like investments from equities and property. As is outlined in the following chart, crystallising losses and changing your overall asset allocation during downturns and periods of market weakness can and will often lead to very poor results in the long-run.
The way to avoid this type of panic decision is to ensure that your overall asset allocation across your investment portfolio is appropriate based on your overall risk profile and tolerance level.
2. Avoid Doubling Down
Another common mistake that we see investors making is to take on excessive levels of risk to try and recoup previous losses quickly. By investing outside of an appropriate asset allocation and risk level based on your financial goals and situation, this will generally lead to greater volatility than you’ll be comfortable with and poor long-term results. The best way to avoid this is to monitor and maintain an appropriate asset allocation level, continue to rebalance your portfolio during the downturn and ‘stick to the plan’
3. Seek Professional Advice, Not From Your Neighbour
If you have a Financial Planner that you’re working with, reach out to them and arrange a time to discuss any concerns you have about your financial plans. This is one of the times that professional advice can often add the most value to avoid the common financial mistakes that are often caused by panic. It’s also important to avoid taking financial advice from unqualified people such as your neighbour or family member. While they might have the best of intentions, this may not create the best long-term financial outcomes for you.
4. Review Your Time Frames
It’s always important to regularly review your financial goals including the time frames associated with each of them. Once you have your financial goals clearly outlined, you can ensure that the asset allocation of your investment portfolio remains appropriate. For example, if you’re just 2 years off retirement, it may not be sensible to have 100% of your portfolio invested in equities. Ensure that your asset allocation is appropriate for your financial goals and risk profile.
We will all get through this time together, and there is light at the end of the tunnel. If you’re experiencing any financial stress or concerns, be sure to reach out and seek professional advice.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.