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Retirement Reimagined: Why Playing It Safe Might Cost You More

Author
Stian
Date
4 February 2025
10 min read

When retirement is on the horizon, many people instinctively shift their pension investments to low-risk options like bonds and money markets. It feels like the safe move - protecting savings from market downturns. But what if this conservative strategy is actually holding you back?

Most of your retirement fund’s growth happens in the last five years before you retire. And if you still have decades to live after you stop working, you’ll need that money to keep growing. According to Stian de Witt, Head of Financial Planning at NMG Benefits, maintaining an aggressive investment approach - even in retirement - can be the key to financial longevity. The secret? A well-structured portfolio, professional guidance, and a smart withdrawal strategy.

Market dips are inevitable, but history shows that high-risk investments tend to rebound and even outperform conservative portfolios over time. If you have additional income sources, holding off on withdrawals during downturns can give your investments time to recover - leading to better long-term returns.

Moving too much of your retirement savings into cash or bonds can mean your money isn’t growing fast enough to keep up with inflation. Over time, this erodes your purchasing power. Keeping a significant portion in equities ensures your investments continue to outpace inflation, sustaining your lifestyle for years to come.

Don’t put all your eggs in one basket - especially not just in the local market. De Witt recommends holding at least 30-40% of your assets in offshore equities to hedge against local market risks and benefit from global economic growth. A well-balanced portfolio enhances resilience and long-term performance.

One of the biggest risks in early retirement is a market crash. If your portfolio takes a hit in the first two years and you’re forced to withdraw from it, you could shorten your retirement income by as much as seven years. The solution? A “cash bucket” strategy - keeping a portion of your funds in cash to cover short-term needs while allowing your more aggressive investments time to recover.

Taxes can take a significant bite out of your retirement income if not managed properly. Strategic tax planning - such as withdrawing from different investment vehicles at the right time - can reduce your tax bracket and stretch your savings by an extra 2-4 years.

The old-school approach of playing it safe with low-risk investments in retirement is no longer the best way forward. With smart planning, diversification, and an aggressive yet structured investment strategy, you can ensure your money not only lasts but continues to grow.

Want to make the most of your retirement savings? Speak to a Certified Financial Planner who can help tailor a strategy to your needs.

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