Longer retirements create an advice challenge as 2.5 million Australians prepare to retire
Neil Rogan
An estimated 2.5 million Australians are expected to retire over the next decade , while Australian Government data shows people aged 65 can expect to live for more than 20 additional years on average . Russell Investments has launched a new Retirement Solution to help financial advisers balance clients’ near-term spending needs with future income and long-term growth.
The solution includes two new managed portfolios, the Russell Investments Short-Term and Medium-Term Portfolios, alongside a suitable long-term growth portfolio and a purpose-built Retirement Calculator.
The Retirement Solution allows advisers to structure client assets across three time horizons: near-term spending and liquidity, future income needs and longer-term capital growth. Advisers can use the new Short-Term and Medium-Term Portfolios for the first two horizons, while retaining a suitable existing portfolio for long-term growth.
The Retirement Calculator supports implementation and ongoing management of the strategy. It helps advisers to determine allocations across the three time horizons, models a personalised glide path into retirement and provides guidance to advisers on rebalancing, as client circumstances, spending needs and portfolio balances change.
Neil Rogan, Head of Distribution, Australia and New Zealand at Russell Investments, said: “Pre- and post-retirement is not a single investment phase. Clients still need long-term growth, but they are also drawing from their portfolio to fund their everyday living expenses. Advisers need a clear way to match client assets to their changing needs. It changes the way advisers need to think about liquidity and investment risk,” Rogan said.
“The challenge for advisers is balancing the money clients need to live on today with the assets that need to remain invested for the years ahead. Our Retirement Solution provides a framework for managing those competing needs.”
A clear structure for retirement
Advisers can use the new Short-Term and Medium-Term Portfolios for the first two horizons. The Short-Term Portfolio focuses on income and capital stability, while the Medium-Term Portfolio invests across income and moderate growth assets. Longer-term assets can remain invested for capital growth.
Separating assets by time horizon can help advisers manage sequencing risk in retirement. The approach is designed to reduce the need to sell longer-term growth assets to fund withdrawals during periods of market weakness.
Designed around existing portfolios
Advisers can use the portfolios individually, or together, depending on client circumstances and existing investment arrangements. They can also retain suitable existing investments for longer-term growth.
“Advisers shouldn’t have to rebuild a client’s portfolio just because a client is approaching retirement,” Rogan said. “The solution gives them the flexibility to introduce the short- and medium-term components as client needs change. This could include an existing Russell Investments Core, Sustainable or Strategic Index Managed Portfolio.”
Both the Short-Term and Medium-Term Portfolios are available now on CFS Edge, with a minimum investment of $5,000.
“One of the strengths of CFS Edge is the breadth and flexibility of its managed account offering. The addition of Russell Investments’ purpose-built Short-Term and Medium-Term Portfolios broadens the range of retirement solutions available on the platform, giving advisers more options to support clients as they transition into and navigate retirement,” said Francy Taylor, Executive Director, Managed Accounts at Colonial First State.
According to Taylor, “Russell Investments has not only designed these portfolios specifically for retirement outcomes but is also supporting advisers with a dedicated retirement calculator to help determine how the portfolios can be used appropriately within a client’s retirement strategy. Together, the portfolios and supporting tools provide advisers with greater flexibility and confidence when constructing retirement income solutions for their clients.”
