With more and more Australian’s retiring earlier and living longer, planning for retirement or what we like to refer to as ‘having choice’ has become especially relevant in recent times.
Retirement sees you entering into a new phase of your life. It is important to ensure you have the capacity to generate sufficient income without outliving your capital, whilst enjoying the lifestyle you have always dreamed about.

This should be an exciting and pleasantly anticipated period, however, for most, it can be very daunting. The feeling of uncertainty is mainly brought about by inadequate retirement planning.

so what is retirement planning?

Retirement planning is getting yourself well organised both personally and financially now to make sure you are ‘on track’ for the future. It involves the integration of a range of disciplines, including taxation, debt structuring, succession planning, superannuation, asset protection, wealth creation, estate planning, insurances and personal mental and physical health.
Your retirement should come down to ‘Choice’. The ultimate outcome being your ability to choose:

Through appropriate planning and the creation of a tailored framework you can expect to eliminate the worry and have peace of mind knowing that you will be able to make informed decisions that won’t affect your long term objectives in retirement.

Whilst your financial positioning is important, retirement planning isn’t all about the money. There are many other factors that need to be considered when planning for your day of choice. Generally it will take a coordinated approach from your accountant, solicitor and financial planner.

Rather than worrying about what things will be like in your retirement years, it is prudent to begin planning and commence appropriate actions. Needless to say the earlier action is taken the more choices may become available.

Recent newspapers have painted doom and gloom over the plight of the stock market. Despite a 50% gain over two years, a negative month in March was greeted with negative headlines and the usual doomsdayers.

It is typical for markets to display volatility. It reflects the optimism and pessimism of the market as a whole as to the state of the domestic economy and corporate profits. It is important during these periods to look through the noise to identify the truth as to the outlook for economic health.

The reason we invest in shares is to enjoy the long term growth associated with this asset class. Compared to other asset classes, companies can re-invest a proportion of their profits back into their business to create growth. This creates a compounding benefit over the longer term. Historically share markets have delivered a return of around 10% pa over a ten year period.

So if you are looking to invest in shares or stay invested the first decision is the likely long term health of the Australian economy. In this respect we can point to a number of favourable trends including the following:

All of these factors point to a solid rate of economic expansion over a ten year period. However there is no doubt in our mind that the short term risks of investing in equities have increased of late. The key factors that lead to this view are as follows:

We have seen smaller companies begin to issue profit downgrades in response to these pressures. Smaller companies lack pricing power and market position and are typically the first to notice a profit impact. We expect margins and profits to be under pressure over the next year as the Australian economy adjusts to these pressures.

There are a number of responses an investor can make in order to position themselves for more volatile and riskier markets. These include:

In conclusion while the risks of investing have definitely increased of late, the long term benefits of investing in share markets remain – solid growth, and strong tax effective dividends. Remember however, when investing in shares they typically have a negative year every four or five years so a long term view is a necessary precursor before investing.

This article was contributed by Gary Fraser of Fitzpatricks Dealer Group Pty Limited. Fitzpatricks are a financial services provider servicing niche clientele and specialise in the creation of personalised and financial strategies that enable their clients to be financially well organised. (Authorised Representative No. 284099, Fitzpatricks Dealer Group Pty Limited AFSL No.247249 ).