Perhaps you have progressed through the financial planning phases, and you are now approaching retirement, and the thought of delving into your retirement savings is keeping you up at night. But there is some comfort to be had, writesWe live in an era where the world literally changes daily, a world seemingly filled with war, pandemics, extreme weather events, disasters, and much uncertainty. For those planning their retirement, this can cause much anxiety and doubt.
Perhaps you have progressed through the financial planning phases, and you are now approaching retirement, and the thought of delving into your retirement savings is keeping you up at night. But there is some comfort to be had. Even though, no one has the crystal ball that will guide us in predicting the next pandemic, the duration and extremity of the war, or any other disaster that can impact your retirement capital.
If your retirement capital is derived from a pension, provident, preservation or a retirement annuity fund, then you would have to decide on a lump sum up to the legislated maximum. You must also consider the amount of discretionary capital you would require into retirement. Generally, this would include an emergency fund, capital to settle debt and/or capital to be invested to provide an income.
One of the biggest factors that will influence the life of your capital, will be the underlying asset allocation of your portfolio. This is the next step in the puzzle and will ultimately determine how long your income will last, how volatile your capital is and how exposed you are to unforeseen local and global events. For example, if we consider the extremes, a portfolio that is 100% invested in cash will not be volatile but will have difficulty outperforming inflation over the long-term.
The key therefore lies in building a portfolio consisting of a mixture of these assets to allow for sufficient capital growth, while at the same time providing a predictable income that will last your lifetime. A well-diversified portfolio will therefore not only give you income security but can provide the crucial diversification that can protect you against unpredictable changes in any one asset class, in the currency, or swings in local and global markets.
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