Four mistakes that wreck retirement

According to the YourLifeChoices Retirement Affordability Index only 19 per cent of those surveyed believed that they would have enough savings to provide an income to the end of their life.

More concerning was the fact that 44 per cent of those that responded to the survey did not think they would have enough savings for their retired life, while the remainder were unsure.

Concerns about downsizing and looking after kids and grandkids and potentially elderly parent can make retirement decisions very difficult, but a lack of action can be one of the biggest mistakes you can make as you start planning your transition from full-time work.

Here are four decisions that can ruin your retirement.

1. Failing to consolidate
Many Australians work many different jobs over their careers, but they often fail to keep all of their superannuation savings in the one account. This can have a disastrous effect on your savings and your eventual retirement income. Not only do you risk losing track of some of your money, particularly if you have changed names or addresses with some of your funds, but you are also paying extra fees and charges on all of your different accounts. A better approach is to consolidate all funds into one superannuation account after speaking to an expert advisor to determine the best one for you. This will cut down on administration fees and ensure your balance grows stronger over time.

2. Not having an emergency fund
Any plan for retirement should include an emergency fund — money you can access immediately. What will you do if your health changes? What if your spouse or one of your kids has an emergency? Will you have money set aside to cover those costs? Most financial planners suggest having enough cash to cover at least three to six months’ worth of living expenses.

3. Not adjusting for inflation
We know prices are forever rising, but the rate at which they increase is anyone’s guess. Power prices have been a good example in recent years, but there will always be some expense that rises at a rate much faster than predicted. This can present significant challenges when trying to work out your cost of living year on year. When you are working, the rises in inflation are offset by potential pay increases, but you rarely have that luxury in retirement, with the indexation of the Age Pension offering little respite. Although year-to-year it may not seem as if prices increase all that much, over a 20- to 30-year retirement, the differences can be drastic.

4. Worrying too much
Retirement shouldn’t be a time of worry and stress. It should be a time to relax and enjoy life after years of working. Some retirees have trouble remembering the reason that they worked so hard to save. They had an idea of the life they wanted in retirement, but they worry so much about running out of money that it can consume their retirement. A comprehensive retirement plan can help you transition from a saving mindset and help give you the confidence to spend on the things you always wanted in retirement.

Are you comfortable with your retirement plan? What would you do differently if you had your time again? What suggestions do you have for others based on your experience?

Related articles:
Five unexpected retirement expenses
Seven common retirement mistakes
How much is enough?

Written by Ben

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