How do we learn to spend our money wisely in retirement?

Personal finance guru Noel Whittaker recently joined host John Deeks on YourLifeChoices’ weekly podcast. This is an edited transcript of their conversation.

John Deeks: You recently published your latest book, Retirement Made Simple. Is that book number 22 or 23?

Noel Whittaker: I think it’s number 23. You kind of lose count after a while. The first one was Making Money Made Simple, and that sold a couple of million copies, and I think this one will go the same way because that was 30 years ago, and all the people who made their fortune reading Making Money Made Simple now need the new book to teach them how to spend the money.

So how do we learn to spend our money wisely in retirement?
There is a wonderful story in the book, about a couple, aged 65, retired. They walk out of their house onto a boat, and that boat will be their home until death. On that boat, there’s a beautiful pantry full of food and a wine fridge full of booze. He says, “Wow, let’s celebrate. How about we open a bottle of wine and have a steak.” She says, “Wait a minute, how long is the journey? Oh, we don’t know how long the journey is, why don’t we just have baked beans tonight and tomorrow night?” And after a couple of months of baked beans, they’re quite happy to eat baked beans. Then they die with wine and good food in the pantry.

So, we need to find balance, but we don’t know how long we may live. How do we proceed?
Every year, you should check the calculators on my website. They will tell you what your superannuation should be when you retire to fund your estimated living costs. Check those every year to stay on track. It’s interesting that most people die with more super than they started with!

What are your thoughts on equity release schemes to provide cash from the family home?
If you’re 75-80, and basically you’ve got your home, which is worth maybe a million dollars or more, but you don’t have much in cash. You can either downsize and free up maybe $400,000-$500,000. And these days you can have $400,000 in super and still get the full Age Pension. Or you take out a reverse mortgage. If you do that, there is no payment of the principal or interest, and the debt is growing. A lot of people don’t like that.

There’s also the view, “I’m going to sell the big old house, it’s costing too much in maintenance.” But then they wait five years and then it costs too much to do the house up to make it saleable. I point out in the section about risk that one of the biggest risks is self-inflicted risk, by hanging on to the house for too long.

What is your view on a tree change or sea change?
I make a point in the book that one of the major factors in retirement happiness is social network.

And that comes from your job, and your family, and your sport and, possibly, your church or other interests. If I suddenly move to Cairns from Brisbane, I’ve lost all of that, and it would be a very lonely life. So, whenever you think you’re going have big scene change, you want to go and live there for six months first.

In chapter one, The maths of money, you write: “For years I’ve been using the riddle of the ‘Lily in the Pond’ to demonstrate compounding interest. It’s probably one of the most important financial concepts you will ever learn.” Can you please explain?
The biggest factor that determines how much you will have on the day you retire and how long your money will last, is the rate of return you can achieve on your assets. Now, the good super funds have averaged 8 per cent over the last 10 years; the more conservative ones 5 per cent. That can make a massive difference on how much you have. The thing about this lily in the pond is it’s more about time. A lily in a pond starts as a tiny speck and doubles every day, and in 10 days, it fills the pond. How long to go from quarter full to full? The answer is two days, because it goes from quarter full to half full on the ninth and half to full on the 10th. Now if that 10-day span was your investment lifetime – maybe 60 or 70 years – if you have to harvest that on the eighth day you’ve lost three-quarters of what you could have had if you’d started earlier. So, it’s about time and rate.

What is your view on financial advice?
I tell another story in the book about a couple who are 50 and their daughter, 30, who wants to buy her first home. They put their name on the title deed. The house costs $400,000 and they’re half owners. Fifteen years have gone by and they are now 65 and applying for the pension. The house has doubled in value. Their share in the house is now $400,000 and, combined with the super, they can’t get the Age Pension. Now, if they sell the house or they give the daughter their half share, which they should have done ages ago, they’ll be up for $100,000 in capital gains tax, plus, Centrelink will hold the asset for five years.

So just that simple act of putting their name on the deed 15 years ago has cost them at least $300,000 at age 65.

Can you explain the ‘death tax’?
What a lot of people don’t know is that when you die, there’s a tax on super of 17 per cent if left to a non-dependant. Say you have $800,000 in super and it goes to your partner, there is no tax to your partner. But then when your partner dies, that’s when the death tax happens. So, what you do is, you give your enduring power of attorney instructions to withdraw all your super tax-free if you’re getting near death and put all that money in your bank account, and that will avoid the death tax.

What should we expect this year? What’s in store?
There are always surprises, but as I have said many, many times, if you take care of the things you can control, you shouldn’t need to worry too much about what’s to come. People say, ‘What’s the economy doing?’ ‘Where’s the market going?’ Basically, you need to make sure that your will and estate planning are in order. That you have an enduring power of attorney. That you have a diversified portfolio, that you have at least four or five years planned spending in cash, or a reliable income source, so you are never forced to dump quality assets when the market is having one of its normal downturns.

Thank you for supporting YourLifeChoices and have a wonderful 2021.

Noel Whittaker is the author of the recently released Retirement Made Simple as well as several other books including Making Money Made Simple. You can buy Retirement Made Simple for $29.99 at

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