KEY POINTS:
Despite being involved in the investment industry his entire career it wasn't until Don Ezra reached 60 - three years ago - that he seriously began to worry about his retirement.
Did he have enough saved to retire at 65? How much money would he need to maintain
his lifestyle and how long would it need to?
Ezra, who works for the Russell Investment Group in the US, sought the advice of a financial adviser who helped him work out a plan.
He now knows he has enough put away to retire at 65 and is able to divert some of his retirement savings to help his children step up on to the property ladder.
But the situation left him searching for ways to help others better understand saving for retirement and what to do with their asset once the golden years have been reached.
Ezra was also lucky to have his new passion indulged by his employer.
As part of his role as director of investment strategy he is able to discuss with others around the world how superannuation saving is changing.
Ezra says there is growing recognition that people are not saving enough for their retirement as they live longer.
New Zealanders are well-known for their love of property investment. Many are reluctant to invest in shares after the 1987 sharemarket crash. But Ezra believes diversification is the most important rule for investors.
"If you own property you should diversify into financial assets - and think globally. There are assets all around the world - why focus just on New Zealand? Just look at the Canadians - they certainly aren't limiting their investment options to Canada."
Ezra says it is not healthy for long-term savings to focus solely on one asset class.
"If you want to eat well after you retire, you have to invest but you also need to ensure you are comfortable with the investments so you sleep well before you retire."
Ezra says it is vital people understand their personal risk level but as a general rule, the younger you are, the more risk you should take.
"If you have got $10,000 and the sharemarket goes through a bad patch the loses are much less than if you are 65 and have $200,000 invested - you don't want to lose 2 per cent then. The idea is to have much more risk at the beginning and less at the end."
Invest for the long term is his other main advice. "Time is your best friend. If you have time, things that don't go well have time to recover."
But figuring out when to change your portfolio to match your changing risk profile can be a challenge. Ezra says a new type of investment called a target date fund is emerging in the US to cater for the need.
The fund automatically adjusts your investments depending on your risk profile.
The target date portfolio might start off with 80 to 90 per cent in growth assets and finish up with around 20 per cent.
"We call that the glide path and the aim is to end up with a soft landing."
He predicts that more than 50 per cent of superannuation funds in the US will move into target date portfolios in the next five years.
"This is the auto-pilot option. It is the biggest trend in the US now."
While investors are expected to reduce their risk towards retirement, Ezra says longer life spans mean some risk can be carried after retirement and turning 65 should not be a signal to sell down all of your investments.
According to his calculations, for an individual that starts investing at 25 and invests a constant percentage of pay until they are 65, for every dollar they take out after retirement, 10 cents will come from money they have put in, 30c from investment returns during the period in which they have saved for retirement and 60c could come from post-retirement returns when the nest egg is at its biggest point.
"What you do with that lump sum is essential - you could be missing out on all that extra return. There is a lot of thought being put into the accumulation of assets process but very little into what happens after you retire."
SAVING UP
* Diversify your investments.
* Invest for the long-term.
* Delay spending your nest egg. Consider holding on to some of your investments after retiring rather than cashing them all up at 65.
