Liz Koh: Three way path for retirement

It is said the biggest financial risk anyone takes in their lifetime is the risk of running out of money before they run out of life. Everybody reaches the starting line for retirement in different financial shape. There are those with little in the way of savings because they decided to spend while they were still young enough to enjoy it, or because they were unable to earn enough to save.

There are those who squirreled away small amounts of money and have a small retirement nest egg.

Others come to the starting line with significant amounts through having been regular contributors to a subsidised superannuation scheme or through being the beneficiaries of an inheritance.

What you have at the starting line of your retirement life will determine your standard of living for the next 20 or 30 years.

Those with little or no savings will have their standard of living determined for them by the controllers of the public purse strings, with inflation being their constant enemy.

For those with money to invest, the challenge becomes one of making what they have last the distance.

There are three stages of retirement: the "live it up" stage when you spend money on enjoying life; the "fix it up" stage during which your car, house and body need maintenance; and the "wind it down" stage when you may need to pay for care. Invest your money in three tranches, one for each stage.

The first amount should be invested in stable, income-producing investments for five or 10 years, while the second and third amounts can be invested for 10 to 20 with low to moderate exposure to growth assets (shares and property) to help protect against the effects of inflation. This will reduce the risk of outliving your money.

Liz Koh is an authorised financial adviser. The advice given here is general and doesn't constitute specific advice to any person. A free disclosure statement can be obtained by calling 0800 273 847.