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Investments, Portfolio Construction, Retirement

SMSFs confident in navigating retirement

SMSFs are managing the challenges of retirement well.

Decision-making in retirement is generally better embraced and managed by SMSF trustees compared to non-SMSF superannuants, an investment manager has said.

“SMSFs are better at the 70/30 portfolio allocation level for longer, though I’m not sure they understand all the risks,” Vanguard head of corporate affairs Robin Bowerman told selfmanagedsuper.

“But because they’ve had it for a long time – typically they’re comfortable with equities and they like imputation credits – so as long as they’re getting income, they’re managing retirement pretty well.

“So their confidence level is pretty high. Whether it’s higher than it should be, that’s why we have a retirement framework for them to think about it.”

Bowerman also underscored the ever-changing super rules as a major influence over how SMSFs navigate their retirement planning.

“Our research calls this out as a real risk because if you plan to retire, at say 68, then someone changes all the rules, that gives you no way to recover and you don’t get any flexibility,” he noted.

“Regulatory risk is absolutely a real risk in the superannuation system.”

Vanguard’s investment strategy group has published three new white papers, including the “Roadmap to financial security: A framework for decision-making in retirement”, which is an appropriate resource for SMSF members, he said.

At the launch in Sydney today, Vanguard senior investment strategist and research co-author Nathan Zahm said retirees find the act of managing their retirement highly daunting.

Zahm noted while there is no universal route to financial security, there are common steps in the journey.

He said resources and processes can empower retirees for their own journey and, in turn, lead to greater confidence in their ability to meet retirement goals.

“With population and life expectancies of retirees in Australia rising while portfolio yields remain at historically low levels, the need for retirees to implement an informed retirement plan is more critical and yet more complex than ever,” he said.

“A myriad of challenging decisions and trade-offs stand between a retiree and a financially secure retirement, and knowing where to start can be overwhelming.

“The framework provides a foundational knowledge about the goals, risks and resources individuals will need when planning for their retirement, and it can be applied regularly throughout retirement and adjusted when necessary as needs and circumstances evolve.”

The white papers, “From assets to income: A goals-based approach to retirement spending” and “The role of the age pension in your retirement plan”, were also launched today as part of the manager’s research suite.

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