This is how to enjoy your retirementAug 01, 2019
The accumulation phase
During your accumulation phase, it can help to think of think of your personal wealth in 3 ‘wells’:
Well 1 – Liquid funds (<12 months)
These liquid funds can be actively managed, and while not a significant percentage of your overall wealth, should be large enough to cover your day-to-day bills and living expenses for the coming year;
Well 2 – Living, lifestyle, and leisure (2 to 5 years)
A second well of money which can also be actively managed to cover upcoming living expenses, holidays and travel, car upgrades, home renovations, school fees, and whatever else is on your 2 to 5 year horizon.
These tend to be reasonably liquid funds, most often a balance between stocks and cash; and
Well 3 – Longer term and legacy (to retirement & beyond)
These are your safer, long-term investments that you ideally never have to sell until your retirement, typically including property and, for some, safe investments in large, established, systemic companies which throw off strong income streams.
I discussed this concept a little further here.
The retirement phase
Have you ever thought about how you’ll generate income in retirement?
Or what happens if markets take a big downwards plunge just as you’re heading into your final years in the workforce?
While long-term market trends might seem reasonably predictable, the sequence of returns from year to year can vary dramatically.
And this can be inconvenient if the drawdowns happen at just the wrong time.
In fact, the range of outcomes arising from sequence of returns risk can be eye-popping, depending upon when you’re withdrawing from your ‘retirement account’.
Thankfully, there are a number of ways to mitigate the risk.
You could simply spend less in retirement; or you could be flexible with your spending depending upon how things play out.
Or you might choose to take volatility out of the equation altogether by seeking a fixed income, although such a level of certainty may come at a cost.
But this is by far the most enjoyable way to enjoy retirement, especially given the significant increase in life expectancy these days.
Please watch the video here
Whenever you’re ready… here are 4 ways we can help you manage your own money and go next level wealth:
- Boom or Bust in 2021 – 20 minute online workshop for investors
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