Four assumptions that could wreck your retirement

Most of us a have a plan for our retirement, but what happens if the assumptions you’ve based that plan on fail to materialise? Here are four assumptions that could wreck your retirement.

Making a plan for your retirement is a good idea. It can ensure you’ll be able to maintain your quality of life in your golden years, and provide you with peace of mind about your future.

But any good plan must contain contingencies. When mapping out what you’ll need for retirement, you’ll undoubtedly use certain assumptions when predicting how much you’ll have in the future.

Assumptions don’t always pan out as predicted, and failing to adequately prepare for this can leave you thousands short of your retirement goals.

Here are four of the most common assumptions that can come back to bite you if they fail to come to fruition.

Read: Why retirement planning must be personal

Stock market will always deliver returns

When calculating your final retirement balance, predicting how much your stock portfolio will be worth forms a substantial part of that figure.

While it’s true that over long periods the ASX 200 has trended upwards, it can also enter long stretches of negative growth such as the decade between 2010 and 2020, often referred to as the “lost decade”.

If you’re entering retirement during one of these down periods, you can end up way short of your original goal. When planning for your retirement, it pays to be more conservative when predicting how much your shares will grow by.

Inflation will stay steady

The latest inflation figures show consumer prices in Australia have grown by more than 5 per cent in the year to March 2022, the highest figure since the introduction of the goods and services tax in 2000.

This was up from 3.5 per cent the year before, which shows just how quickly things can change. The causes of inflation are myriad and are very hard to predict. Entering retirement during a period of high inflation can have disastrous effects on quality of life.

Read: Ultimate retiree checklist to make sure you’re not missing out

You’ll be able to work past retirement age

Many people’s retirement plans include working beyond age 67 to maximise their savings. This can be an excellent way to get even more out of your retirement, especially if your body and mind are up to it.

But it can be dangerous to bank on being able to work beyond this age. It’s no secret that as you get older, your chances of developing health conditions that might prevent work increase. It’s also well-known that if older people become unemployed, they may find it impossible to get another job.

When planning your retirement, it pays to have safeguards for entering retirement such as greatly reducing your predicted income after age 67.

Read: Are you retiring with more than you need?

You’ll get an inheritance

Receiving an inheritance is another key pillar of many people’s retirement plans. But it’s never a good idea to rely on hypotheticals that may not happen. Any number of circumstances could cause your inheritance to be spent between now and when you inherit it.

Relying too much on an inheritance can encourage people to overspend and undersave during their working lives, leading to disappointment in retirement.

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Brad Lockyer
Brad Lockyer
Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.
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