Exploring non-traditional investment options to boost your retirement income 

As over 60s plan for retirement, it can be worth considering investment options beyond the traditional avenues of savings and superannuation.

While savings and superannuation certainly have their role to play, diversifying one’s portfolio through alternative investments can potentially lead to higher returns. Among the options available, cryptocurrencies, shares, stocks, and property investments can be particularly attractive.

In an effort to understand some of the more non-traditional investment options available, Starts at 60 delves into the benefits and drawbacks of each investment type, as well as important factors that you should consider when making investment decisions.

Starting your investment journey

If you’re considering investing, there are some important factors to keep in mind. Firstly, it’s essential to have a clear understanding of your financial goals and risk tolerance. With a shorter investment horizon, it’s important to strike a balance between the potential for higher returns and the need to protect your principal.

Additionally, consider diversifying your investments across different asset classes to help manage risk. To get started, consult with a financial advisor to create a personalised investment plan that aligns with your goals and risk profile.

It’s also important to do your own research and educate yourself on the basics of investing, such as the different types of investments available and how to evaluate their potential risks and returns.

Daniel Albanes, Head of Wealth at Liston Newton Advisory, explains that “the best investment options for retirement are the ones that are aligned with your goals.”

“Before choosing where to place your hard-earned dollars, here at Liston Newton Advisory we suggest defining what are your goals and retirement strategy,” Albanes says.

Some questions that you may want to consider include:

With the right approach, investing can help you achieve your financial goals and enjoy a comfortable retirement.

Exploring your investment options

Cryptocurrencies

Cryptocurrencies are digital or virtual currencies that use cryptography for security. They operate independently of a central bank and can be traded on online exchanges. One of the benefits of cryptocurrencies is that they are decentralised, meaning that they are not subject to government or bank regulations. This can be appealing to retirees who may be wary of traditional financial institutions.

Additionally, cryptocurrencies can offer high returns on investment, especially if purchased during a market boom. However, there are also significant risks associated with cryptocurrencies. They can be volatile, and their value can fluctuate dramatically, making them a risky investment for those who cannot tolerate risk.

As Certified Financial Planner, Daniel Rickard from Illuminvest points out, “crypto is a high-volatility asset that is unlikely to be suitable for most retirees.”

“Crypto is not an income-producing asset and will only provide Capital Growth,” Rickard explains.

“Therefore, if a retiree wanted to hold crypto it should be a minor part of a wider portfolio given the importance of income to a retiree.”

Shares and Stocks

Shares, stocks, or equities, represent ownership in a company. When you invest in shares, you are essentially buying a small portion of a company, which means that you become a shareholder and have a say in the company’s decisions. The value of your shares will rise or fall based on the performance of the company and other market factors. Shares can offer the potential for capital appreciation, as the value of the shares may increase over time, and they may also provide income through dividends, which are payments made by the company to its shareholders.

Rickard explains that “investing in high-quality companies with a history of consistent dividend payments can provide a regular income stream for retirees.”

“These stocks can also offer potential capital appreciation over the long term. Retiree’s also benefit from franking credits which can provide tax rebates when in a low-tax environment (e.g. Super),” he says.

Shares and stocks can be a potentially beneficial way to grow your retirement savings, but it’s important to approach them with caution and a long-term mindset. By diversifying your investments and seeking professional advice, you can mitigate risk and improve your chances of achieving your financial goals.

Property Investments

Property investments can be a good way for retirees to diversify their portfolios and generate income. Rental payments can provide you with a steady stream of income, and the property may appreciate in value over time. Additionally, property investments are often seen as a hedge against inflation, as property values tend to increase with inflation.

Albenes points out that “there may be properties that can provide a good yield (rent %) for retirees, if they are willing to hold these for the long term.”

However, property investments also require active management, and you need to consider the potential costs associated with maintaining a property.

As Rickard highlights, “property investments may have high entry costs, generally provide lower yields than shares after expenses and are less liquid than other assets.”

Factors to consider before you invest

When considering investment options, it’s important to take a few factors into account. First and foremost, you need to consider your risk tolerance. Investments that offer high returns also tend to come with higher risks, and it’s crucial to determine how much risk you are willing to take on.

Additionally, you need to consider your income needs. Investments that generate income, such as shares, stocks, and property investments, can be a good way to supplement retirement income. Finally, consider your overall financial goals. Are you looking to generate income, grow your wealth, or preserve your assets? Different investment options will be more suitable for different goals.

Rickard suggests the following considerations that retirees should take into account when deciding which investment option is best for them.

• It is unlikely that any one option alone will be best for retirees. Diversification is the only free lunch in investing and a critical aspect of building a retiree’s investment portfolio.
• To decide on what investment options will be best for you would want to have a good understanding of the following; Risk Tolerance, Investment Horizon, Income Needs, Liquidity Needs and various other factors.

Albanes also stressed the importance of diversifying one’s portfolio in order to minimise risk, suggesting that by doing so “you can reduce the overall risk of your investments while still potentially earning a reasonable return.”

“The idea behind diversification is to spread your risk across multiple investments so that if one investment performs poorly, it will not have a significant impact on your overall portfolio,” he explains.

“As a retiree, diversification can be particularly important because you may not have the luxury of time to recover from losses in your investments.”

Non-traditional investment options such as cryptocurrencies, shares and stocks, and property investment can offer retirees an opportunity to diversify their portfolios and potentially generate higher returns on their retirement savings. While these investments can come with risks, with proper research, education, and guidance from financial professionals, you can make informed decisions and choose the investment options that best suit your financial goals and risk tolerance.

It’s important to remember that every individual’s financial situation is unique, and what works for one retiree may not be the best option for another. As such, it’s crucial to consider your personal circumstances, consult with financial professionals, and weigh the potential risks and benefits before making any investment decisions. By doing so, you can maximise your retirement income and enjoy a comfortable and financially secure retirement.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.