Accumulating wealth is the goal of any good investor, particularly those who want to fund a particular lifestyle in retirement. But is all wealth created equal? And how should people rate the investments that they do have? Considering both the quantity and quality of wealth is an important first step.
Here is a checklist of 10 important points to take into account when planning for retirement income and assessing the quality of an investment portfolio.
Goals and objectives
To gain financial independence and fund a lifestyle, people can consider a rough rule of thumb of having an amount that can support withdrawals of 5 percent a year. For example, one would need to have at least $3 million invested to spend $150,000 a year. It is important to note that taxes should also be taken into account.
Those who aim to have the cash to fund a lifestyle are advised to use the 5 percent rule of thumb as the best approach. However, different types of investments are needed if the goal is capital accumulation. Some rules must be bent if they do not align with a person’s goals and objectives, which also means that rating personal wealth should not be done against a general rule, but against a person’s unique goals and objectives. Personal finance is personal and should not be approached with a blanket solution.
Access to retirement funds
The structure for holding investments is important, as it impacts accessibility and tax. If you are under 75, consider topping up your super as it’s the most tax-effective structure to hold your money in because of the tax-free retirement phrase. However, the same cannot be said for a 50-year-old who cannot access their superannuation until retirement.
