Investing for retirement income
RETIREES will always require a steady source of income to meet their financial needs, and of paramount importance will be the need to ensure they have enough funds to last them through retirement.
With Australians facing the prospect of a longer retirement, many investors are now realising that traditional income based financial products of the past may not fully meet their financial needs.
It is therefore important that investors, who will be relying on an income stream to fund their living expenses, consider the various options available.
These opportunities may come from exposure to fixed income markets, but also equities which can provide not only the capital growth most associate with shares, but also a steady stream of income.
Lower cash rates and government bond yields have prompted a widespread hunt for income-producing investments. Although rates are likely to head up when the economy shows sustained signs of improvement, the yield climate will probably remain challenging for the foreseeable future.
As a consequence, demand for investments such as dividend paying stocks is likely to remain high.
For an investor entering retirement, holding a well-diversified, actively managed portfolio is a key. Growth and defensive assets both play an important part of the asset mix to meet the longer-term needs of retirees.
However, the proportion of the portfolio that's dedicated to equities or bonds will largely depend on what age the investor plans to retire, and how much capital they've accumulated.
One way to access a steady source of income with exposure to capital growth is through dividend-paying equities.
In addition to the growth available from equities, they can also provide a remarkably stable income for investors, that can also grow as a company's share price grows.