3 ways to make sure your money never retires

Estimated reading time
 5 min

Learn all about

• Keeping your money working for you by earning interest
• Investing in real estate, stocks and bonds
• Reducing the effects of 'loss aversion'

After a lifetime of hard work, the time has finally come. You can hang up your hard hat, ditch the briefcase, or say goodbye to your uniform – it’s time for that sweet retirement lifestyle.

Now that you’re not working full time, you can shift your focus to on what matters most. Whether it’s spending more time with the family or going on a campervan adventure, now’s your chance to enjoy life to its very fullest. To make the most of your new lifestyle, you’ll need to shift your focus to an investing style that can provide a financially healthy and stable retirement.

That’s why we’re deep-diving into how you can invest in a way that works for you. Let’s get into it.

1. Keep earning through interest

Once you can access your hard-earned super, it can be a smart idea to consolidate it with any other savings you may have and continue putting it to work building wealth.

If you’re happy to put a chunk of your nest egg aside, you can use a term deposit or high interest earning savings account. A term deposit means you’re locking away a lump sum for a period of time where you’ll earn a fixed interest rate, which will be cashed out to you when the period is over.

By contrast, you can actively contribute to your savings, earn interest and withdraw your funds at any time if you choose a high interest earning savings account.
 

  Hot tip:

If you decide to open an account-based pension (an income drawn from and managed by your super fund) then you can pop it in a term deposit or savings account and watch your wealth grow thanks to interest rates.

2. Downsize or invest in the property market

Retirement can be a great time to downsize and free up some cash or add to your existing property portfolio.

For instance, you might consider downsizing if you suddenly find yourself with a big property to maintain and fewer people (or pets) to fill it. Plus, there are many benefits to downsizing, such as paying off your current mortgage, living in your dream location and freeing up time spent on maintenance.

You can also choose to invest in property if you have the funds to do so, like buying an apartment and renting it out. This can mean you’ll get a new income source through rent and tax benefits while also growing your wealth as your property grows in value. A financial advisor can help you identify the best move for your financial situation.

3. Explore other ways to invest your cash

Now that you’re no longer earning a salary, you can look to investments to supplement your income and grow your wealth. Here are some investing strategies you can explore, but remember, always consider what is right for you:

Stock market and shares

Investing in the stock market allows you to earn dividends and capital growth from Australian or international company shares. The stock market is often unpredictable, and investing in international companies can be more complicated than investing in Australian companies.

It’s also important you consider the possibility of diversifying your stocks, as you’re not putting all your eggs in one basket – you’re spreading the risk of loss across local and international markets, or even across different industries (or a bit of both). Understanding how the system works first can help you feel confident with your investment, and you can always talk to an investment expert for more guidance if you need to.

Bonds

Bonds are essentially a loan from you to a company or government bodies where you earn interest on the money lent. This interest, along with the initial amount lent, will be paid back to you at maturity, which is when the bond term ends. Investing in bonds can be a more stable option, as they tend to carry lower risk compared to other markets.

Annuities

An annuity is a type of fixed-term pension arrangement you can set up with your super fund or life insurance company. It starts with a lump-sum payment or series of payments that then come back to you as a steady stream of income. When you set up an annuity, you can choose how long you want the payments to last for, such as for a set number of years or for the rest of your life.

Think of it as a long-term source of guaranteed income that can ensure you don’t spend all your retirement savings at once. While annuities can also earn you interest, this varies based on the type of annuity you take out. Bear in mind, this option isn’t as flexible as investing or saving in other ways.

Don’t invest in loss aversion

No matter what you invest in, there’s always an element of risk involved. But it can be easy to focus on the potential losses involved with investing (especially when you’re not earning a steady income), rather than thinking of the potential gains. This mindset could lead you to avoid investing altogether due to fear of losing money.

This way of thinking is called loss aversion, where we feel the pain of loss more strongly than gains. By understanding your risk appetite, and talking to an investing expert about your options, you can discover an investment strategy that works for you.