Q. I am a 62 year old female pensioner who has about $60,000 to invest for the rest of my life. I am not risk averse, but also know that this must grow to provide for the rest of my life. I am thinking of investing in gold that can be sold when I need extra cash. I have no experience in self-managed super (SMSF), but my money must be invested in super so my pension cannot be affected (until I reach 65 and a half).

 Is investing in gold a good idea? Can it be held in a super account?

 A. Given your age I assume you are on a Disability Support Pension that will revert to the Age Pension after age 65.5.  To qualify to receive the Disability  Support Pension, your assets would need to be less than $202,000 as a single homeowner to qualify to receive the full benefit.  Given you have investment assets of $60,000 you would appear to be well under the cap.  Whilst I am a big believer in using the Superannuation system, given your circumstances, I don’t believe holding the money inside or outside Superannuation will have an impact on your entitlements either now or into the future.

In planning for your retirement you need consider your income needs, your capital needs, your appetite for investment risk and how complicated you wish to make your financial affairs.

In terms of income needs, identify how much income you need on a fortnightly basis to meet your living expenses.  How you source that income should form part of your future strategy.

Your Capital needs relates to likely larger capital expenses you may need to fund beyond your income requirements.  For example to replace a motor vehicle, maintain your home or access to a lump sum in an emergency.

Investment risk reflects how much volatility you are prepared experience in your portfolio as a result your choice of investments.  Those relying on a fixed amount of capital typically would prefer to reduce the amount of volatility in their portfolio as they cannot afford to diminish their capital pool when it is relied upon to provide regular income.  Typically a retiree would diversify their portfolio between around 50% Growth assets such as shares and property and 50% defensive assets such as cash and Fixed Interest to provide a balance between growth and income.

I would strongly encourage you to keep your financial planning as simple as possible.  With complexity comes cost and with limited means to fund your goals, the cost of managing your financial affairs should be kept as little as possible.  It would not be cost effective for you to establish and manage a Self-Managed Super fund (SMSF).   If you really wish to have exposure to Gold in your Superannuation portfolio, I would recommend you seek exposure via shares or exchange traded funds within a Public Offer Superannuation fund as opposed to establishing a SMSF to buy Bullion Gold.

I do not believe investing a meaningful portion of your assets in Gold to fund your retirement is a good idea. The world Gold Council recommends that investors should hold around 2.5% of their portfolio in Gold for a low risk portfolio up to no more than 10% for a high risk portfolio.

Gold Bullion can be sold to produce a lump sum, but you are at the mercy of the spot price of the commodity at the time you wish to sell. The spot price of Gold in the past 5 years has ranged from $1901 to $1085 US$ per ounce.  The difference between what Gold is sold for and bought (the buy/sell spread) can be between 3 and 10% making trading gold expensive.

Gold does not generate an income.  Unlike conventional investments, the asset itself will not grow in size. It is a static lump of shiny metal, whose value will rise and fall on the basis of demand.

Identify your income needs and build a strategy around how best to meet them through a combination of Pension benefits and investment income.  Identify any future capital needs and put aside some money for an emergency in a bank account at call.  Make  sure your investments are diversified amongst a range of asset both growth and defensive  to reduce your exposure to risk and volatility.

I believe you need to seek Financial Planning advice.  If you are self-directed, at least get an opinion from a Financial Planner  to make sure your strategy is appropriate,  future goals are attainable and to minimise the risk of any mistakes. You cannot afford to get this wrong.

Follow Andrew on Twitter @AndrewHeavenFP. This article was originally published in The Australian