10th Mar 2018
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The money myths you should know about in retirement
Author: Ben Hocking
Money myths you should know

There are some common misconceptions about money and retirement, and some of them can affect your standard of living in retirement.

Here are some of the most popular money myths that could hurt you in retirement.

Myth #1 Retirement planning can wait
Wrong. If you have not yet retired, prepare for retirement as early as you possibly can. There is now sufficient research to prove that those with a clear sense of direction for their later years, and intentions of active social engagement, intergenerational connections, and life-long learning, will be clearly ahead. The more you save now, the less you’ll worry later. To plan successfully, you will need to:

  • clarify your issues and goals
  • benchmark your current position
  • convert your goals into a plan
  • convert this plan into achievable steps. 


Myth #2 You don’t need a budget if you keep track of your money
It’s a great start if you know how much money you have in your bank account or accounts at any given time, but this is not the same as having a spending budget. When you are just tracking your spending, you are only looking at the money you have already spent. A budget, on the other hand, looks forward. It enables you to look at how you are going to spend your money, this can allow you to prioritise paying off debt, and plan for the future.

Myth #3 If you need money in retirement, you can just get a job
According to YourLifeChoices most recent Retirement Affordability Research, 81 per cent of all retirees believe they will outlive their money. While some people believe they can always get back into the workforce if it looks like they are going to run out of money, the reality can be very different. YourLifeChoices research shows 56 per cent of retirees were forced into retirement by ill health or lack of work opportunity – not because they actually wanted to leave the workforce. As technology evolves, it can be very difficult to just re-enter the workforce. Those aged 50 or over who find themselves out of work can take more than a year to secure full-time employment again – and some never do.

Myth #4 Your financial fate is sealed after you turn 50
As life expectancy grows, so do the number of years people plan to work. According to YourLifeChoices research, almost a third of those who are not currently retired think they will retire aged 70 or over. If this is the case, a 50-year-old could have two decades to save and build up a superannuation nest egg.

Myth #5 My partner manages the finances, so I don’t need to worry about it
This is a bad one. The divorce rate in Australia is dropping, but it is still high enough that you need to be involved in the financial conversation. None of us should leave any important aspect of our life entirely in the hands of someone else. If you are not communicating regularly about something as important as your finances, you may be in for some very nasty surprises. Leaving finances up to one partner is too much work, responsibility and stress for one person. In a relationship, things like that are meant to be shared.

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    COMMENTS

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    Cowboy Jim
    13th Mar 2018
    11:42am
    Another myth is doing the rounds here: You have to have spent all your money in order to get the full pension and I find it amazing that some people did exactly that. Like putting $40'000 into a new car just to get rid of the money. People like that never went to one of those free seminars offered by C/link in every major town.
    sunnyOz
    13th Mar 2018
    12:26pm
    Correct - A single person can have $160,000 in the bank and still get the full pension. PLUS work a few hours a week (under $125) and still not be penalised. So pension, plus interest on super, plus casual job - manageable.
    Linda
    13th Mar 2018
    12:34pm
    Why bother to plan anything at all re retirement. These days, at the planning stage it is about what the laws and rules are now, but when we retire, it could be all different. This leaves us in a no win situation. Jaded? Yes indeed.
    Cowboy Jim
    13th Mar 2018
    12:49pm
    You are soooo right, Linda. But sunnyOz above is on the money. That is how we organised our retirement. Not too much but just enough to also manage private health insurance which at my age I think is unfortunately necessary.
    Greg
    13th Mar 2018
    5:28pm
    True the rules keep changing however if you plan as per today's conditions you'll be in a better position to adjust figures along the way and you shouldn't be too far out. Also be conservative and think worst scenarios so you have wiggle room.

    A couple of years ago I worked out my position and budget going forward until 90, Tony and Joe came along and changed limits and sure the figures aren't quite as good as before but only just a small change and our yearly surplus is now not quite so large - but still a surplus.
    Greg
    13th Mar 2018
    5:28pm
    True the rules keep changing however if you plan as per today's conditions you'll be in a better position to adjust figures along the way and you shouldn't be too far out. Also be conservative and think worst scenarios so you have wiggle room.

    A couple of years ago I worked out my position and budget going forward until 90, Tony and Joe came along and changed limits and sure the figures aren't quite as good as before but only just a small change and our yearly surplus is now not quite so large - but still a surplus.
    Sundays
    13th Mar 2018
    12:59pm
    I would add that if you own a home, make sure it is paid off before you retire. Another myth, you don’t need much in retirement. Yes you do if you want to travel, or pursue hobbies you never had time for before
    Jacky
    13th Mar 2018
    1:21pm
    Own your home outright most important before you retire. Do repairs or makeover before you retire. Travel as much as you can before you retire while still healthy and able to enjoy everything. Some people plan to do everything when they retire but ill health prevents so many people enjoying the good life. Everybody needs money, but I don't think you need a million dollars before you retire. Those that think they do will just keep working and never get to enjoy what should be an enjoyable time to relax and do whatever you want. $200,000 - $300,000 will go a long way.
    Cowboy Jim
    13th Mar 2018
    3:28pm
    Jacky - your own home, 200 to 300'000 and the pension, could never
    fault that. If one is not happy with that then there is a problem -
    maybe the kids would like to inherit a bit more!
    Linda
    13th Mar 2018
    4:18pm
    I agree. Jacky and Cowboy. It is important to consider safe shower and toilet areas, and the need to keep the maintenance up. As mobility goes down and one has to stay home more, I would think a nice garden, even a small one offers comfort and interest.

    We say that now, as things stand now but into the future who knows what might be decided and what the situation might be. It is the concept of uncertainty about income that is mostly fixed.

    It is also good that home care is now more possible than before.


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