When you’re working, investing often has a clear purpose: grow your wealth.
Salary covers day-to-day expenses, so investments can be left to compound and appreciate over time. However, once retirement arrives, priorities can shift. Without regular income from work, many investors ask: do I need my money to grow, or do I need it to pay me an income?
Growth Investments: Building for the Long Term
Growth-focused investments, such as shares or property, aim to increase in value over time. They can provide higher returns but often come with more volatility.
For retirees, growth investments may help to preserve wealth for the future but they can also mean holding assets that don’t generate regular income. This can make cashflow planning more difficult.
Income Investments: Cashflow You Can Rely On
Income-focused investments prioritise regular payments. These could be dividend stocks, term investments, or lending products that pay on a monthly or quarterly cycle such as a finance company investment.
An advantage is predictability: cash arriving when you need it without selling assets. For retirees, income-focused investments can simplify budgeting and provide peace of mind that expenses can be met on schedule.
At Luminate Finance, for example, the lending model is designed around monthly interest payments.
Interest is paid to qualifying wholesale investors on the first business day of each month, creating an income flow which can be incorporated into broader financial planning, and complement other retirement income sources.
Finding the Right Mix
In practice, most retirement portfolios include both growth and income focused investments. The mix depends on personal goals:
- Do you want to preserve wealth for future generations?
- Do you want predictable income?
- How much risk are you comfortable with?
All investments involve risk, and you should always consult with your professional adviser regarding the right mix and to understand the risks associated with each
investment type.
What to Consider
When weighing income against growth for a new investment, think about:
- Timing: Do you need income now, or can you wait for assets to appreciate?
- Liquidity: How easily do you need to be able to access your money if needed?
- Risk tolerance: Are you comfortable with potential ups and downs in value, or do you prefer stability?
The Bottom Line
Retirement investing is about aligning your money with your lifestyle. Growth investments help maintain the long-term value of capital, while income investments provide
the stability of cashflow.
The right balance will be different for everyone but understanding the distinction between the two is the first step in making your money work for this stage of life.
* This article provides information that is general in nature and is not financial advice. You should seek advice from your professional adviser before making investment decisions.