Jarden Wealth Weekly: Future-proofing your retirement - how much is enough?

The decisions you make today as a portfolio investor will shape the retirement you’ll enjoy tomorrow. Photo / 123RF

Mark Logan is a wealth management adviser based in Auckland.

OPINION

A question I get asked often is: Should I take on some investment risk to achieve more capital growth for my retirement if I’m already feeling financially secure?

It’s a reasonable question to ask, but a better question is centred around more than just accumulating wealth. You might want to ask instead: How do I want to invest in my future self and family?

Remember, the decisions you make today as a portfolio investor will shape the retirement you’ll enjoy tomorrow. By focusing on growth, you’re not just planning for retirement - you’re planning for a retirement filled with possibilities.

The initial phase of retirement is often the most active and vibrant. How do you set yourself up to ensure those years you are living without constraints?

Many people will already have some significant travel in their dreams about retirement, but here are three more considerations for the question - how much is enough?

Preparing for healthcare advancements

While we’ve been replacing hips and knees for decades, recent breakthroughs are pushing the boundaries of what’s possible in healthcare. Some of these include:

• CRISPR gene editing - Technology that holds promise for treating genetic disorders and certain cancers.
• Brain-computer interfaces - These have seen recent advancements which could help restore mobility and communication for individuals with severe neurological conditions. Parkinson’s is just one of the conditions that is being targeted.
• 3D-printed organs - Scientists are making significant strides in creating functional 3D-printed organs, potentially revolutionising transplant medicine.

Some of these cutting-edge treatments may not be your cup of tea, but the point is major advances are going to keep coming. When they do arrive, they are likely to come with substantial costs. Having the choice to pay for areas not covered by the healthcare system as new treatments become viable can add to the flexibility and freedom in your life.

Changing demographics

The ratio of retirees to working-age taxpayers is increasing rapidly in many countries, putting pressure on public healthcare and pension systems. According to Stats NZ, the amount of people aged over 65 in New Zealand will rise from 16% in 2020 to 26% in 2060. As the elderly population grows, the country will require increased tax rates to pay for superannuation and public services from a shrinking working population.

This demographic shift has several implications, such as:

• Increased healthcare demand - The pressures on public healthcare services will rise. More retirees will require medical care, while there will be proportionally fewer taxpayers to fund these services. Consequently, the role of private healthcare is likely to grow, making the need for personal financial freedom even more crucial.
• Pension pressure - Public pension systems may face challenges in maintaining current benefit levels.

By focusing on capital growth now, with an investment strategy that aligns with your circumstances, you’re positioning yourself to handle these demographic shifts with greater ease and independence.

Flexibility in housing choices

As you age, your housing needs may change. With a good investment strategy, you can help ensure the flexibility for decisions like downsizing to a more manageable home, purchasing a second home in a desirable location, and accessing high-quality assisted living or long-term care facilities if needed.

Having the choice to do what suits you, not just settle for what you can afford, will make your later years in life more comfortable.

So, what’s the right investment approach to ensure you’re investing enough for your future self?

Here are my top five tips to help you achieve a well-grown retirement fund:

1. Diversification - Spread investments across various asset classes to balance risk and reward.
2. Long-term focus - Resist the urge to react to short-term market fluctuations.
3. Regular rebalancing - Periodically review and adjust your portfolio to maintain your desired asset allocation.
4. Stay informed - Keep abreast of economic trends and breakthrough technologies that may impact your investments.
5. Protecting against inflation - Inflation is a silent threat to retirement savings. A growth-focused portfolio, at an appropriate risk level for you, helps ensure your purchasing power remains strong over time.

Understanding how much is enough when investing for your future goes beyond growing wealth; it’s about enhancing your quality of life and securing flexibility for opportunities ahead. A well-grown retirement fund allows you to think beyond your own needs. You may be able to provide financial support to children or grandchildren, fund educational opportunities for family members, or contribute significantly to causes you’re passionate about.

By investing in your future now, you’re ensuring your retirement years are filled with choices, opportunities, and the ability to adapt to whatever the future holds. Whether it’s accessing groundbreaking medical treatments, traveling the world, or leaving a meaningful legacy, a robust investment strategy opens doors that might otherwise remain closed.

Jarden Wealth Limited is an NZX Advisory firm. A financial advice disclosure statement is available free of charge at jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement/.

Full disclaimer available at jarden.co.nz/wealth-sales-and-research-disclaimer.