Prepare for lean retirement years

RETIREMENT plans need to make provisions for volatile market times like we're experiencing now, experts say.

Prepare for lean retirement years

RETIREMENT plans must have a provision for negative periods such as the one we are experiencing, AMP financial planner Mark Borg says.

He said most people who were rattled by the bear market had invested in growth assets - such as shares and property - without expecting any lean times.

Australia's share market has slumped up to 46 per cent in the past year, and property prices are falling in most states.

Mr Borg said despite volatility, growth assets had historically delivered the best investment returns over any 10-year period, much higher than cash.

"Given the current economic climate, if a person is retiring now, they might like to consider freeing up money from other sources or asset classes first,'' he said.

"If this isn't an option, it's worth considering leaving the Australian component of your shares in place and withdraw the balance.

"The fear is that uninformed investors who perhaps jumped into the market at the top of a cycle will now jump out and flee to cash. This strategy is particularly dangerous for retirees as there is a real risk they could outlive their savings.''

Mr Borg said more Australians were spending more than a quarter of their life in retirement and wishful thinking was a poor substitute for careful planning.

He said people should consider that there were different stages of retirement. The early years was a time of high spending as retirees were active and likely to travel.

In latter stages the focus switched to a quieter life, less spending, and ensuring wills and enduring powers of attorney were up to date.

"Retirees at 60 can expect to live for more than 20 years, which means they are still long-term investors and should therefore make decisions based on this,'' Mr Borg said.