Scott Keefer has recently asked for input by Fiona Harris,  contributor to the Morningstar online information site.  The topic Fiona was looking at was investment strategies for a delayed retirement.  The following is a copy of  the article.  To view the original please click on the link - Investment Strategies for a Delayed Retirement.

Delaying retirement calls for a back to basics approach to investing and a shift in attitude and expectations.
 
Financial advisers are telling clients to delay retirement and change their thinking when they say the global financial crisis (GFC) has robbed them of their retirement dreams.

"Clients are definitely reconsidering options to be more certain that they have sufficient assets to sustain the cost of living they require," A Clear Direction Financial Planning principal financial adviser Scott Keefer says.

"A lot of clients are playing it year by year, but we do have clients [delaying retirement]," HLB Mann Judd partner Michael Hutton says.

A survey recently conducted by Mercer of 519 working Australians aged 40-65 reveals just how many people are facing the retirement age dilemma.

Some 42 per cent of the survey's participants said they will have to delay their retirement as a result of the downturn. This number jumped to 60 per cent for those aged over 60.

In practical terms, this means working longer.  About 33 per cent of respondents said they could have to work up to four years longer. Meanwhile, 19 per cent said the impact of the downturn could mean an extra six years in the workforce.

"That's a fairly significant change to lifestyle," Ascent Private Wealth principal Gordon Thoms says. "That's a big change to have to work for another four years."
So is this possible? Can a pre-retiree get their retirement back on track in four to six years?

"Four to six years is an OK horizon," HLB Mann Judd Sydney partner Michael Hutton says. "Particularly if you're not drawing on assets plus you're putting money back and investment markets are behaving themselves."

Hutton calls it the "triple whammy" effect - but in a good way. He says by working longer, investors can save extra money. Also, they will need less money in retirement because it will be shorter. Finally, investment markets are on the way up, so investors can capitalise on the upswing.

Thoms agrees that a four to six year time horizon presents a good opportunity.

"Four to six years is plenty of time if you are invested in good quality assets."
The key is having a long-term investment strategy, investing in quality assets, achieving good diversification and not paying too much for this diversification. It's pretty straight forward really.

"It's not the most riveting story," Thoms says.

Making the money back

While financial planners interviewed were optimistic about investors' chances of recouping their losses by delaying retirement, the two wild cards are the amount that has been lost and how the investment portfolio is structured.

According to Keefer, the key factor is the value of assets an investor has lost.

"Let's say it is a balanced investor [with] 70 per cent growth assets and 30 per cent defensive assets whereby they have lost 18 per cent over the past 21 months (Nov 2007 - July 2009).  So $500,000 at the top of the market has now become $410,000.  But the other aspect to remember is that unless the portfolio has been rebalanced they now probably have a 40/60 portfolio with $240,000 of growth assets," Keefer says.

He says if the long term average return from the growth assets was consistently achieved of 6 per cent above inflation or 9 per cent per annum, it would take about four years for the $240,000 of growth assets to grow to $340,000.

Add inflation to the equation and it would take six years.

To read the remainder of the article please click on this link

Regards,
Scott Keefer

Other blogs since the last edition have included: