Retirement Reinvented: Exploring Superannuation Investment Choices For A Secure Future

When it comes to investing your super at retirement age, there are a few options to choose from. You can leave your money in your super account, take it all out as a lump sum, or move some or all of it into an account-based pension or annuity. You can also choose to invest your super in a mix of investments to protect against market volatility. It's important to consider your risk tolerance, investment timeframe, and financial goals when deciding how to invest your super. Additionally, you may want to seek advice from a financial planner to ensure you're making the most informed decisions about your retirement income.

Pre-mixed options

It is important to note that different super funds and rating houses may use different names and levels of growth assets for the same type of investment option. Therefore, it is crucial to always check the target level of growth assets in the investment option before investing. This ensures that individuals are comfortable with the level of risk associated with the investment.

• Standard pre-mixed options: These options are based on investment risk categories and typically include a diversified combination of assets. Super funds may offer a wide range of choices regarding asset mixes, with some offering up to 350 different options.
• Other pre-mixed options: These include socially responsible/sustainable investment options and indexed investment options. Socially responsible options consider sustainability and social responsibility factors, while indexed options aim to mirror major investment indexes and are often lower-cost.

Overall, pre-mixed options provide a convenient way for retirees to invest their pension assets, offering diversification and expert management while allowing individuals to choose the level of risk that suits their needs and goals.

Other pre-mixed options

There are two other pre-mixed investment options to choose from:

Socially responsible/sustainable investment options

These options allow retirees to have their super pension assets invested in a way that considers sustainability or social responsibility factors. For example, fostering environmental, social and governance (ESG) change through investment. These options are often further tailored by their level of growth assets (e.g. Sustainable Growth or Balanced Socially Responsible).

Indexed investment options

This option involves selecting a diversified indexing strategy when investing pension assets. Indexing is often a lower-cost approach to investing, as it selects assets to mirror the makeup of major investment indexes, such as the S&P/ASX 300 Index. This option may be suitable for those who are concerned about investment fees and are satisfied with achieving the benchmark investment return.

DIY investment mix

When it comes to retirement, there are many investment options available to you. One of these options is to create your own DIY investment mix.

A DIY investment mix gives you a medium level of control over your investments. You are free to create your own mix of asset classes to suit your personal circumstances, goals, and risk tolerance. This option typically involves using managed investment funds based on a single asset class, such as Australian or International Shares, Global Property, Global Fixed Interest, and Cash.

Investment Timeframe

The length of your investment timeframe will depend on how long you plan to invest your super savings before retirement and how long you want your savings to last during retirement. Even if you don't know when you'll retire, thinking about your investment timeframe can help you choose options that match your goals.

Hands-on Level

A DIY investment mix requires a medium hands-on level. This means you will need to be actively involved in managing your investments and have some knowledge of investment markets. If you are not comfortable with this level of involvement, you may prefer a pre-mixed option, where the asset mix and diversification are determined for you.

Risk Tolerance

Different investment timeframes and options come with different risk levels. It's important to consider how much investment risk you are comfortable with. Short-term investments (five years or less) carry the risk of short-term fluctuations that could reduce your savings. Longer-term investments (20 years or more) provide more time to ride out short-term ups and downs, but the main risk is keeping up with wage inflation.

Additionally, different types of assets have different levels of risk. You can offset this risk by selecting diverse investments and creating a well-diversified portfolio.

Investment Options

When creating your DIY investment mix, you can choose from a wide range of investment options, including:

• International Shares
• Diversified Fixed Interest
• Australian Fixed Interest
• International Fixed Interest
• Australian Shares
• Direct Real Property
• ASX-listed Shares
• Exchange-Traded Funds (ETFs)
• Term Deposits
• Listed Investment Companies (LICs)
• Managed Funds
• Listed Equities
• Bank Accounts
• SMAs
• ETFs
• MDAs
• IMAs
• Listed Property
• Unlisted Property
• Unit Trusts
• Private Equity

Remember, the best investment mix will depend on your personal circumstances, goals, and risk tolerance. It's important to do your research and consider seeking financial advice to ensure you make the right choices for your retirement.

Direct investments

Direct investment options offer a selection of direct investments to choose from, including direct shares, exchange-traded funds (ETFs), term deposits and listed investment companies (LICs). These options are generally only suitable for those with experience investing their own assets and who are willing to spend time managing their pension portfolio.

With direct investment options, retirees can create their own investment strategy by investing in their choice of shares, ETFs, LICs, term deposits and cash. This allows for a tailored investment strategy that combines the options chosen with the investments made by the super fund on the retiree's behalf.

To get started with direct investment options, individuals typically need to open a separate cash account within their super fund, using money from their super. This cash account is then used to buy investments and pay associated costs, such as brokerage fees. Any returns or proceeds from the sale of investments flow back into this account.

It is important to note that direct investment options may come with additional rules and conditions, and it is essential to carefully review the relevant documentation before investing. Additionally, direct investment options can incur significant costs, including brokerage fees and ETF fees, which are paid directly by the individual.

When considering direct investment options, it is crucial to assess your risk tolerance and investment goals. These options may not provide the same level of diversification as professionally managed super funds, and a more hands-on approach may be required to manage your investments effectively.

Government Age Pension

The Government Age Pension is one of several options for income in retirement. Over 60% of Australians over 65 years are eligible for part or full Government Age Pension. The eligibility criteria are available on the Australian Institute of Health and Welfare website.

The Age Pension can work in tandem with other sources of income, such as your super. Once you retire and can access your super, you can leave the money in your super account (in the 'accumulation phase') until you need it, take all or part of it as a lump sum, or move some or all of it into an account-based pension or annuity.

Account-based pensions and annuities are two different types of super income streams. Account-based pensions give you a regular income until your super runs out, and you have some flexibility in how much of your super you move, how often you get paid, how much you get in each payment, and how this money is invested. Annuities, on the other hand, offer guaranteed income payments with more certainty but less flexibility than account-based pensions. They can be set up for a fixed term, until you reach your average life expectancy, or for the rest of your life (life annuity).

In Australia, you can generally take money out of your super when you're 65. If you're younger, but you've reached the ''preservation age' of between 55 and 60, you can also access your super. If you're still working, a transition to retirement account could be an option to withdraw your super savings as regular income.

Frequently asked questions