Investing for Retirees – The TINA Effect

I love a good acronym and wish I could claim responsibility for this one. After hearing it to describe investing in the current climate, I researched the term ‘TINA’ only to find it has been around for hundreds of years! TINA stands for ‘There Is No Alternative’. Much of the current buoyancy in the Australian sharemarket, we believe, stems from this principle.

We have touched on it in many of our sharemarket articles in recent times – record low interest rates are driving investors away from cash and fixed interest investments into the sharemarket. There is no alternative!

The ASX 200 has continued to climb through 2021 as the US Election becomes a distant memory, the world returns to economic growth post COVID, and central banks continue to print money with, some would say, reckless abandon. The recovery from the turmoil of 2020, in a sharemarket sense, is nearly done. It’s difficult to see what will derail the ‘onward and upward’ moods of local and global stockmarket indexes.

While it’s our job to be across all of this, the needs of many of our retired clients are far simpler. They simply want their investments/retirement savings to generate a suitable income return to fund their lifestyle in retirement. Investing a portion of their available funds into ‘growth’ assets such as shares and property historically and still does makes sense. Long term capital growth of these assets assists a portfolio’s value to keep pace with the cost of living. However, we have been very busy over the last 12 months working with those who have predominantly used term deposits as a core part of their retirement investments.

Retirees currently have limited choices for generating income. Cash and term deposit returns are horrible, and the prospect of entering or re-entering the investment property game is a bridge too far. It’s therefore no surprise that we, in our share investing role, have become a lot busier.

We have long advocated that a blue chip Australian share portfolio should form at least a part of most retiree’s investment pool. Fully franked, sustainable dividend income can provide shareholders with an income that, in the current environment, can be superior to term deposit income. While sharemarket investing involves volatility, we will always try to attempt to make our retired investors focus on income derived from an investment, not what it is worth. After all, it is income that funds your retirement cashflow, not what something is worth.

There are two really important things to keep in mind if you are considering changing your investment strategy. Firstly, shares do have risk attached. An all in approach to shares is not advisable and can be very dangerous. Education about the risks that are involved and a graduated investment strategy is often the best approach.

Secondly, the government is well aware of the issues facing retirees and their income. Prior to COVID, this was to be a major consideration, with the current government in the process of reviewing retirement incomes. This review and subsequent policy will still play out at some point, so watch this space!

If you are considering the adequacy of your income in retirement, an important first step is to seek advice. Contact us today so that we can guide you through your options.

This website contains general advice which does not consider your particular circumstances. You should seek advice from Wakefield Partners who can consider if the general advice is right for you.