The 3 things needed to retire confidently
What does it take to be confident in retirement?
The FMA commissioned Colmar Brunton to survey New Zealanders aged between 60 and 74 years, to find out their experiences of retirement and how information or advice has helped them manage their retirement savings. Those older New Zealanders reporting strong confidence about their retirement have three key things in common:
They started retirement planning early. Ten years or more before retirement is best, but confidence begins to sharply increase even six years out
They got help from an adviser, family, financial provider, or through their own research on four key topics (which we describe below)
They have a wider range of investments with an emphasis on growth investments.
Of the New Zealanders who were clients of Authorised Financial Advisers (AFAs), they sought this advice as they were concerned they didn’t have the knowledge to prepare properly for retirement. They were also looking for guidance on how to achieve better returns for their investments.
Almost all AFA clients said that establishing trust with their adviser was crucial and this was based on clear communication throughout the relationship. Investors who work closely with an adviser were happier choosing a broader range of investments, taking more risk and worrying less about ups and downs in their investments.
Paul Gregory, FMA Director of External Communications and Investor Capability, said: “A lot of existing research, including our own, has shown how poorly prepared the majority of older New Zealanders feel about their retirement. With this work we wanted to engage with people about the factors that would make them feel confident, and ask them why. We hope the insights these people provided will prompt New Zealanders to take some action.
“One of the most important things we found was that while getting advice from a professional, regulated financial adviser works, it’s not the only route to confidence. Talking to family and friends, opening some books or using the internet, or resources from a financial provider, were just as good provided they covered the four key topics in the report.
“The real difference comes from starting early. The investors feeling most confident are more likely to have looked for information or advice more than 10 years out from retirement. They are also more likely to have a healthy retirement savings balance. But there is still a lot of confidence, and significant final retirement balances, among investors who started between six and 10 years out from retirement,” Mr Gregory said.
“None of this is particularly surprising. Starting your planning early and getting help are common sense. But we’ve gone a step further and had investors tell us that if you do these things, you feel confident, are invested sensibly, and will end up with better financial resources in retirement,” Mr Gregory said.
Four key topics to think about and help you wise-up
Investors feeling confident about retirement have identified four key topics that have helped them get set up for life after work. From the professional advice or other help they got, investors feel comfortable because they understand:
The most suitable investments for them and their goals
Their finances and budgets, so they can have confidence their money will last
They can check in with their investments, including with expert help, to get further guidance
Investment risk, so they worry less about investments going up and down and also how it impacts the amount of money they will have to live on
Want to grow your confidence for retirement? Contact us.
Article source: www.fma.govt.nz
The Colmar Brunton research was carried out online in December 2016. A total of 501 people aged 60 – 74 years participated in the research. The margin of error is +/- 4.4 per cent.
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