If we’ve learnt anything from the economic devastation caused by the COVID-19 crisis, it’s the importance of having money on hand when we really need it. Nearly 6 million Australian’s now find themselves unemployed – which is exactly the same situation we all face on retirement. Yes, on retirement our income from employment ceases and beside any other investments we’ve made along the way, our ability to purchase anything all comes down to the amount of Superannuation we’ve accumulated during our working life. In this month’s article Financial Adviser and Mortgage Broker, ROD LINGARD, discusses how we can become a savvy Super investors and create the retirement lifestyle we desire.

With all that is going on in the world at the moment many people are asking “is it a good time to review my super?”.

In my last blog, I discussed the long-term consequences of withdrawing from Super, and suggested it would be a great idea to do the calculations to determine what the consequences might be.

The next step in the process is reviewing your Super.

I want to start with what Financial Planners call ‘asset allocation’.

I also mentioned that a blog such as this cannot be used as personal Financial Advice, and that you should speak with a Financial Planner or myself before making any decisions.

Many readers will have their superannuation in one single fund.  Typically, these are called ‘Balanced’ Funds or ‘Growth’ Funds or something similar.

With these types of superannuation funds, all the investments are mixed up together. Sometimes this works really well as you are allowing a fund manager to decide how to invest your money, and into which style of assets.

The downside to this type of fund is that when you wish to withdraw, you cannot choose which assets are sold to process your withdrawal.

Balanced Superannuation

If you had $100,000 invested in this example balanced fund, it means you have:

  • $15,000 in cash
  • $20,000 in Australian Shares
  • $20,000 in International Shares
  • $10,000 in Listed Property
  • $35,000 in Fixed Interest or Bonds.

This may be perfectly appropriate.  But, if you want to withdraw, you are forced to withdraw in the same proportion in which the fund is invested.  That is, you may prefer NOT to sell your shares, but you have no choice.

In the current environment, you may wish to sell down your Cash holdings or your Fixed Interest holdings, and leave the shares untouched, but this is not possible in a balanced fund.

Is there a solution?

One approach might be to ‘deconstruct’ the balanced fund prior to making the withdrawal.

By deconstruct I mean you could isolate the cash, the shares, and so on. After the fund is deconstructed, you could then target the specific investment types for withdrawal.

Again, using this example, if the fund were ‘deconstructed’ you might decide to withdraw from cash and fixed interest, rather than withdrawing from shares (which may have decreased in value).

What if I want to Review, but don’t wish to Withdraw?

Given the economic turmoil the world is facing, now might be a great time to review your Super.  You may merely want to fully understand what you are invested in, and how your fund is set up. You may think it’s a great time to adjust the balance of the various investment types to take advantage of market movements.  We call this ‘rebalancing’.

As I mentioned at the outset of this blog, this information should not be relied upon as advice.  There is much to think consider, and I would urge you to seek professional advice.

In these challenging times, I extend the offer of a complimentary consultation via the communication device of your choice.

Rod Lingard is a Mortgage Broker and a Licensed Financial Adviser at Lifestyle Connexion and can be contacted on 0400 160 461. Financial Advice is provided by Rod Lingard – Authorised Representative No: 248734 of Hunter Green Pty Ltd | AFSL No 225962.

General Advice Warning: This blog is not designed to replace professional advice. It has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the advice, in light of your own objectives, financial situation or needs before making any decision as to what is appropriate for you.

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Corona Virus Become Investor Savvy and Review Your Super