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.