As Australia’s population ages and ‘baby boomer’ retirements head toward their zenith in 2025, a discussion on the Retirement Risk Zone, that is the 10 years leading to retirement, is timely.

The importance of the discussion is heightened by Australia having one of the highest allocations to equities and the smallest aggregate allocations to fixed income in the world, with the small allocation to fixed income even more pronounced in the SMSF sector at just 1.2%.

This report, the 7^th in a series written by the Australian Centre for Financial Studies (“ACFS”) and commissioned by NAB, asks whether the risk of capital loss in retirement portfolios is adequately compensated by the potential for capital gains and/or dividend yields in the final 10 years to retirement.

To answer this question, the ACFS study uses a unique data set to extrapolate financial wealth at retirement by running three simple asset allocation models – 100% equities, 100% fixed income investments and 50/50 of each.  The report finds it is the impact of contributions to superannuation savings which has the most impact on household financial wealth rather than investment returns.  The impact of asset allocation on increasing financial wealth is more muted.

The report highlights the need for continued development of Australian Corporate Bond market – through education, more products and improved access for investors.

To find out more download the full report:

• How will Australians retire?  (PDF,1MB)

Explore previous reports from the ACFS:

• Infrastructure Bonds: A missing market for retail investors – July 2016 (PDF,462kb)  This report, the sixth in a series on the Corporate Bond market, focusses on the potential for growth of and access to a market in bonds linked to infrastructure provision.

•  Australian Debt Securities and Corporate Bonds: Improving access to the Corporate Bond Market for retail investors – June 2015 (PDF, 462KB)  The fifth in a series on the Corporate Bond market, begins by assessing where the market is currently at, the key factors affecting the growth of the market, and the regulatory and other impediments to connecting investors and issuers.

• Australian Debt Securities and Corporate Bonds: Trends and prospects – February 2014   This fourth report investigates recent developments in the Australian Corporate Bond market, places the Australian market in an international context and speculates on what the future holds for the asset class.

• Australian Debt Securities and Corporate Bonds: How to add Australian Debt Securities and Corporate Bonds to a portfolio – October 2013 The third report covers the important topic of accessing the fixed income market and the various methods investors can use to access debt securities and corporate bonds.

• Australian Debt Securities and Corporate Bonds: What’s the risk important consideration for Investors – July 2013
  The second report in the series outlined the importance of understanding the different types of corporate bonds, the nature of risks involved and what levels of return is appropriate. Why do companies issue corporate bonds and how do the risks differ from company shares?

• Australian Corporate Bonds – The missing asset class for retail investors – January 2013
  The first report in the series examined the importance of corporate bonds as an asset class for investors, and discussed the reasons they should be considered as part of a diversified investment portfolio.