Investments outside super
Grow your nest egg
Outside super, there is a bewildering number of investments
on offer. You need to find a mix of investments that will fit
Security should be at the top of your mind. You will have
greater security if you diversify your investments. You might need
your money to last for 20 years or more so it's good to have
investments that will at least keep pace with inflation. You may
also need a reliable, long-term income stream.
A key rule to investing in retirement is to diversify. This is
even more important for retirees - if you lose money it will be
hard to replace.
Some retirees have been devastated because they put all their
money in one investment. They lost their life savings when that
company went bankrupt, had a run of bad luck or the promoter turned
out to be a crook. See diversification for more details.
Case study: Katie diversifies her retirement investments
Katie has $80,000 that she
wants to invest to supplement her super. She decides to invest
$40,000 in a mix of blue-chip shares from different industries.
Katie spreads the other half of her money across two
diversified managed funds and a term deposit. By diversifying her
investments, she can ride the ups and downs of the market.
Capital growth investments, such as property and shares, are
good if you want to invest your money for the long term (more than
7 years). These investments will generally increase in value over
time. Of course, they can also fall in value from time to time, as
the global financial crisis showed. Growth investments will
hopefully also pay dividends. You can use these as income,
or reinvest them for further growth.
Shares and property may be purchased directly. An easier way is
to invest in managed funds which own shares or
A strong portfolio of blue chip shares can deliver good returns. They are more flexible
investments than property as they can be bought and sold in small
parcels. Owning shares also has tax benefits. However, share
markets are volatile. The value of a share can drop dramatically in
a few hours and companies can go broke overnight. This can be
daunting for new or nervous investors. See shares for more
The Australian Securities
Exchange and the Australian Investors
Association offer investing courses. Seek financial
advice before investing.
Many people invest in residential property to boost their
wealth. You can take advantage of capital gains and there are tax
benefits arising from negative gearing and depreciation allowances,
especially if you are in the higher tax brackets.
However, people in retirement generally will not buy an
investment property as their main investment. It is poor diversification. You could lose seriously
if property prices fall in that area, if the property is vacant or
if tenants don't pay their rent. If you need money you can't sell
part of a property, and you can't sell it quickly at a top price.
See property for
Case study: John and Angela buy an investment property
John and Angela, both 60,
bought an investment property for $150,000, using savings of
$40,000 as a deposit. The costs involved in the purchase were
$8,000. They borrowed $102,000 and counted on a capital gain to
offset their costs. However, the house needed a lot of repairs.
By the time they retired at age 65, the property market had not
taken off as they hoped and they only got $140,000 for their house
after selling costs and repairs. They lost $18,000, nearly half the
money they started with, as well as any money they could have made
with their $40,000 savings. If you want to invest in property,
start at a younger age and think long term.
and term deposits
These accounts are a good way to earn money for daily living
expenses and emergencies. There are no entry and exit fees and your
cash is easily accessible. You are sure of getting your money back,
plus any interest. However, you will have to pay fees if you want
to get out of a term deposit early.
However, there are no capital gains or tax benefits and the
interest you earn may not be enough to keep up with inflation.
Interest-bearing savings accounts and term
deposits will generally earn you less money in the long term
than property or shares.
You should spend some time researching online savings,
transaction and term deposit accounts to compare different
If you are interested in a diversified mix of investments but
aren't sure where to start, or would rather leave the hard work to
experienced people, you may want to consider investing in managed
There are many types of funds, fee structures and investment managers. Do your research
before you dive in. Retirees need to be careful about mortgage
funds and property funds. Although these have been successful in
the past, many people have recently burnt their fingers. See managed
funds for more information.
Think carefully about your investment
strategy as it will affect the income you receive in retirement.
Reduce risk by spreading your money in different types of
investments. Consider getting financial advice before you start investing.
Last updated: 14 Feb 2019