The five rules of retirement

YourLifeChoices asks a lot of questions. Some of these are quite nosy. But there’s a reason and that’s because we’re continually striving to better understand retirement affordability and how to help our 230,000 members achieve the best retirement outcomes.

Hence, our most recent Retirement Affordability Survey which we created in partnership with The Australian Institute (TAI). We asked 27 questions about your retirement situation, be it planning, transitioning to or managing in retirement.

To date, we’ve received over 4000 responses and the feedback you have shared is very interesting. This data will be analysed by TAI over the next few weeks and a full report will be available to our members in the next YourLifeChoices Retirement Update in early April.

But in the meantime, one recent survey response has caught my attention and it got me thinking about our priorities as we age.

This was the answer to a question in the Retirement Insights 2017 Survey we conducted in January. We asked, “In one word, what is your greatest concern in retirement?” and the answer was ‘money’ – in essence, outliving your savings!

We have asked this question over the past six or so years and this year was the first time that money was considered to be more of a worry than health. We were aware that many readers were hurting financially and household expenses in retirement are perceived to be increasing faster than income, but for money to be a greater cause for concern than health is a big shift.

This led us to consider ways in which we could share some basic common sense questions for those who are feeling anxious about their financial situation – some ways in which you might like to audit your current situation and to hopefully set your mind at rest or suggest things you can do to ease these fears.

So today we share these five basic rules for reviewing your retirement savings or income. And if this doesn’t help, email us your specific question and we’ll hand it over to our expert to find out more!

Top five
1. Know what you have

2. Keep the fees low

3. Spend less than you earn

4. Maximise your entitlements

5. Keep money in context

Do you know what you have?
Sounds simple, doesn’t it? But sadly, it’s quite common for those at the pointy end of retirement to still only have a hazy idea of their assets and liabilities. Yet, it’s a simple matter to set up a basic statement in Excel – and you only need to do this once.

Include a column for you and your partner and list everything you have in the way of assets – property, shares, savings, superannuation, business investments and any other sizable possessions.

Now list all debt, including mortgage, personal loans, credit card debt or loans on a business, car, caravan or the like. The difference between the two is your net assets.

This amount may shock, surprise or even make you happy – whichever, it’s critical information and is important to share it with a financial professional if you use one.

Are you keeping the fees low?
Next step is to consider the fees or interest you are paying on everything.

So, if you are financing debt, be it a mortgage, phone plan or credit card, keep a close eye on your fees – the difference to your annual income can be significant.

Australians pay the third highest fees in the OECD when it comes to super. There are cost-effective options, so make sure you use comparison tables to evaluate which are best for you.

And be sure to read your annual statement, particularly the net benefits to members. Is this amount reasonable? Check if it could be better. There is also a major difference in returns between different types of funds.

Do you spend less than you earn?
Like Mr Micawber, we all understand that this is the definition of happiness. But how many of us can say, hand on heart, that we do this? And worse still, how many of us have absolutely NO idea? I blame the introduction of credit cards.

Back in the mid-70s, we were all sent a shiny ‘Bankcard’ by our banks and away we went. Saving to purchase, or starting a lay-by became a thing of the past. Credit meant instant gratification and with it, the discipline of budgeting disappeared.

We wanted, we spent, we acquired and then came the statement. Ouch! So we paid off the minimum and the debt ballooned. As the braver financial commentators, such as Scott Pape, have noted, debt is dangerous and ditching your credit cards is the very best way of living within your means.

So don’t put it off. Sit down today with your savings or pension statement, print out your spending record, be it credit or debit and or cash, and compare the two. If the answer is a negative number, get help now. Financial counsellors are a good place to start.

Maximise your entitlements
Another tough question. Are you claiming every entitlement you can? Do you even know what these are? Sadly, our government agencies are not likely to come looking for you when you become entitled to an Age Pension – it’s up to you to approach them! So one little known fact is that even if you do not have all the paperwork required to apply for the Age Pension, you can lodge a claim to get the process started. When are you entitled? That depends on your birthdate.

In addition to the Age Pension, there are other entitlements: concession cards, Seniors cards and seniors’ discounts. One small example – as an over 60 working fewer than 35 hours in Victoria, you can travel for free on public transport on weekends.

Similar entitlements in other states offer great discounts, as do private companies, such as cinema chains, coffee shops and some food stores.

And last, but far from least, the fifth rule of retirement:

Keep money in context
They say humans are ruled by two strong emotions: fear and greed. But I beg to differ. When we review the feedback from our members, their family and loved ones are number one on their lists. So, the concept of greed comes in a very poor second.

The mistake many retirees make, or are now making, is their concern over being able to meet bills so as not to become a burden on others. This comes at the expense of ranking health at the top of their lists. And it should be, as becoming the richest person in the cemetery is a very dubious honour.

YourLifeChoices Retirement Insights Survey tells us that a significant 55 per cent of retirees did not retire of their own accord, with 31 per cent retiring due to poor health and 24 per cent retiring because they could not find suitable work. Additionally, forty-six per cent remain ‘under employed’.

So, the number one goal for all of us should be to stop ranking money as a number one worry and take some time out to consider our health. How long has it been since you had an extended doctor’s appointment for a full-on health check? Are you undertaking all the recommended screening tests for bowel cancer, breast cancer and prostate cancer? How’s your BMI and blood pressure? Do you ever check your cholesterol?

So, let’s shift the emphasis to what matters most. Make an appointment with your GP today; run through all of the above, and ask what you can do to reduce your risk of lifestyle diseases.

And then pause, smell the roses, and go back to reviewing that retirement income.

Written by Kaye Fallick

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