Financial Security –A Fact or A Feeling

When it comes to financial security it is important to be real. You either have sufficient accumulated wealth which is a fact, or you have a feeling that you are alright. In an ideal world your feeling should be backed up by fact. There is nothing wrong with feeling financially secure but being financially secure is much better. And of course, there are ways to reduce the risk along the way.

Throughout life we go through different stages. Unless you expect to inherit significant amounts of assets, the chances are you will have to work to accumulate your financial assets. One of the problems with inheritances is that you seldom ever know when you will receive them, nor necessarily the quantum amount.

It is very important to know your numbers. So, when you are building your wealth consider how much you can save per year compared to how much you actually save per year.

How are your investment assets allocated? If there is non-tax-deductible debt, it is normally more prudent to pay this off as quickly as possible. What is the state of your health and what about your parents? Certain illnesses are strongly correlated between generations. Realistically what age do you expect to live to? What is your current age? What age do you expect to retire?

When you are two to five years away from retirement it can be prudent to preserve your wealth by taking a more conservative investment approach. This could be considered more peace of mind to ensure a comfortable retirement.

Some research indicates that even in retirement there can be a need for a relatively high percentage of growth investments (predominantly shares) as the investment time frame can still be for many years. There is no easy answer to this and it may depend largely on economic conditions at the time.

If, at the time of retirement, interest rates were low and domestic and international economies were coming out of recession, there would be a strong argument that to benefit from the conditions a greater allocation to growth investments should be held than in a more normal market.

If you are serious about your retirement and investments, why not take the opportunity of having an obligation free review from an experienced financial adviser?

Disclaimer

Steven Barton (FSP 32663) and Susan Pascoe Barton (FSP 32382) are Certified Financial Planners and Authorised Financial Advisers.  Their initial disclosure statements are available free of charge by contacting them on (07) 3060080 or they can be downloaded from www.pascoebarton.co.nz. This column is general in nature and should not be regarded as personalised investment advice.