14th Sep 2016
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Retirement mistakes – the big ones to avoid
Green road sign saying retriement next exit

Watch our new video seven common retirement mistakes.

A successful retirement is more about knowing what not to do, so here are the seven planning mistakes that it will pay you to avoid.

Underestimating years in retirement
No plan can be successful if you have no idea of the duration it needs to cover. Assuming a retirement age of 65, you can expect to spend on average 19 years in retirement if you’re a man, and 22 years if you’re female. During these years, you may have to spend more on health care than you expected, and government income support rules may change,which means that you’ll have less income than expected. Or you may simply find it difficult to adjust your lifestyle to match your limited or fixed income.

Not sticking to a budget
The secret to a happy (retirement) life is simple:good health and low debt. So learning to live within a fixed-income budget will enable you to enjoy your later years. This lesson is a hard one –so why not cut back your expenses before you leave work? Try cutting up the credit cards and living on 60 per cent of your current salary as a test to see the adjustments you will need to make. Financial counsellors are available to help you get serious if years of overspending are a difficult habit to break.

Assuming you’ve left it too late
It’s never too late, nor do you ever have too little in your savings to consider getting financial planning advice. Planning professionals will be able to advise the best course of action to make the most of what you have, in the time available. This may include salary sacrificing into super, starting a transition-to-retirement strategy, or reducing your debt quickly. It’s important, however, to work with a financial planner who actually does put your interests first, as the law requires.

Putting all your eggs in one basket
Diversifying your investments, not only in regards to type but also time frames for maturity, will give you the best opportunity to see the highest possible returns, and on a more regular basis. It’s necessary to set yourself short- and long-term goals to help ensure you have money available to you for the duration of your retirement.

Not researching the investment or potential risk
As with any major purchase, it is prudent to shop around and consider the features and benefits of the investment to ensure it suits your needs and objectives. It’s also important to consider the risk factors that can potentially affect this investment to avoid any future nasty surprises. Determine your risk profile and diversify across various assets and asset classes as necessary.

Missing changes to Age Pension thresholds
Having been rejected once, and with their circumstances remaining unchanged, many people do not think to reapply for an Age Pension. However, indexation of asset and income thresholds, changes to deeming rates, and the changes to thresholds for the Commonwealth Seniors Health Card, may mean that you become eligible to receive some form of concession or payment from Centrelink. Make sure you check out your eligibility at least annually.

Not having enough money at hand
Investing for the long term is important and can help you achieve your lifestyle requirements later in life. However, restrictions, penalties and/or delays may apply when withdrawing funds from some fixed or long-term investments under certain circumstances. Hold enough funds at hand to ensure you can cover everyday expenses and unexpected emergencies.





    COMMENTS

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    Old Man
    15th Sep 2016
    11:22am
    "government income support rules may change,which means that you’ll have less income than expected"
    Well, here we go again making scary comments without a shred of evidence to support them. Age pensions have never decreased since they were introduced in 1908 and there has never been any proposals to reduce existing pensions by any political party. It can be argued that the removal of the carbon tax supplement is a reduction but this only applies to new pension applications so if you never had it, you can't claim that you lost it.
    Anonymous
    15th Sep 2016
    11:58am
    BUT - it does setup 2 pension rates - with one pensioner group getting more than another. The carbon tax supplement won't be indexed and will be eroded away over time.
    KSS
    15th Sep 2016
    12:41pm
    The carbon tax no longer exists so the carbon tax supplement should also be axed. And indeed it will be for new pension claimants.
    GeorgeM
    15th Sep 2016
    1:48pm
    "government income support rules may change,which means that you’ll have less income than expected"
    A good example is the massive impact on 300,000+ part-pensioners by reducing their Age Pension income by thousands as result of the changes to Assets Test from Jan 2017 - you have to be blind or a pure Liberal party troll to ignore this.
    Rodent
    15th Sep 2016
    2:20pm
    Hey Old Man , while you may be correct that the Pension payment rate has not decreased over time are you seriously saying that the Asset Test Changes as from 1 Jan 2017 wont result in PENSION DECREASES for many?

    15th Sep 2016
    11:39am
    ALL of the above are contingent upon the rules of the game staying the same. When, NOT IF but WHEN, they are changed by the GOVERNMENT these rules are no longer applicable and there are NO grandfather clauses to protect us who have followed these rules! We are seeing this happening today and, unfortunately, will see this happen again in the future if the government continues to be as inept and ignorant as they are now. Wake up Australia.
    Pamiea
    15th Sep 2016
    12:07pm
    Hey Reasons what are you referring to when you say one pensioner group gets more than another??
    Anonymous
    15th Sep 2016
    12:18pm
    New pensioners don't get the carbon tax rebate - hence you get 2 groups of pensioners - one being paid more - and one less (the carbon tax rebate).
    KSS
    15th Sep 2016
    12:42pm
    Yes! No one should get it. The carbon tax was repealed!
    Rae
    16th Sep 2016
    10:04am
    Do you include the tax cut in that KSS? Will we go back to paying tax on incomes over $6000 instead of $18000? If no one should get it surely those cuts would need to be pulled back.

    It would certainly help with government revenue.
    ChristineS
    15th Sep 2016
    12:14pm
    The changes to indexation of Age Pension from being linked to Average Wage to CPI WILL reduce value of Pension?
    Rae
    16th Sep 2016
    10:06am
    Yes it certainly will.

    Pensioners will need to include that consideration when planning budgets and making decisions about whether they can afford to spend or maybe should be saving a bit more for future costs.
    Pamiea
    15th Sep 2016
    12:22pm
    Thanks for the explanation Reasons. I thought you may have been having a shot at the single pension verses a couples pension as there are some people on here who think that couples should get double a single persons pension!! Crazy thinking!!
    The pom
    15th Sep 2016
    12:39pm
    My wife and I started out in our early fifties after failed marriages, with very few assets, so we had to work at setting things up. as we neither drank smoked or gambled we were able to budget and save, retiring in our late 60s with a paid house and good investments. Now in our middle 80s we are still comfortably well off on a part pension and investment income
    counting pennies
    15th Sep 2016
    1:54pm
    Isnt the pension changes next year,a change in government support? Dont forget the pension reduction will go from $1.50 per $1000 to $3 per $1000 .Although you gain another $50k before the pension reduces,currently you would lose $75 of your pension for between 200-250k.So those with 200-250k would gain $75max under the new scheme.Those with $300k would lose $3 for every $1000 over $250k,so $150max at $300k.Where do your assets stand?
    Rae
    16th Sep 2016
    10:22am
    I have a very wise friend who saw this coming and so cashed out all investments, built a gorgeous new home within walking distance to a large centre of shopping, doctors etc and kept just $200 000 of bank shares.

    Now gets the full pension, will get the increase and has no worries at all about how to create income from investments and needing to pay full costs for everything.Has that card that gives those discounts which saves thousands.

    Trying to raise income as rates, dividends and rents fall and with a recession more likely with every billion the government pulls out of the economy is harder and harder.

    Getting a government fixed amount with all the concessions is seeming very desirable.

    I'm seriously considering doing the same thing. Perhaps a lovely mobile home as I believe rental assistance can be obtained for the park fees.

    I have three kids all with very large yards as well.

    If I sell up everything, gift the kids, use $150 000 for the next 5 years, keep $250 000 in investments then in 5 years I won't have to worry about the economy at all.

    The single pension is worth $390 000 and that doesn't include the discounts from having that magic card.

    I thought being self sufficient and saving was a good thing but apparently the markets don't agree. Rates at 1.5%, rents at 2% and dividends falling. Centrelink's deeming rates are looking pretty damn good.
    counting pennies
    15th Sep 2016
    1:54pm
    Isnt the pension changes next year,a change in government support? Dont forget the pension reduction will go from $1.50 per $1000 to $3 per $1000 .Although you gain another $50k before the pension reduces,currently you would lose $75 of your pension for between 200-250k.So those with 200-250k would gain $75max under the new scheme.Those with $300k would lose $3 for every $1000 over $250k,so $150max at $300k.Where do your assets stand?
    bob menzies
    15th Sep 2016
    2:30pm
    I agree with KSS - I was lucky when I started in workforce I was encouraged to find a job wth a defined benefit scheme - at 18 I had no idea what that was but my dad did - so I got a job not paying great but reasonably secure - not public service and after I got a Defined pension I went to another company and started again and just managed to get another defined pension before retiring. Since early 90s most defined schemes were closed (except pollys and judges but even those closed around 2007) so its harder for everyone to save for a retirement these days - Keating said in 1991 that 15% was minimum needed and lot of workers still don't get that - I understand public service, military, big business meployees get at least 14.5% but a lot of workers still only get 9.25%.
    I also understand close to 1600 people have in excess of $5m in super with the highest just on $100m (source ATO tabled by a politician) and these fold have used super to minimise tax - 98% of workers could only dream of this. The Super changes are fine and it would have been good had Costello done this in 2007.
    My worry is that in 2013 Shorten said we don't have a budget problem we have 2 trillion in super - this suggest she doesn't understand super is owned by each citizen - it is not government money and that is why Turnbull must now say Super has no further changes.
    Rosret
    15th Sep 2016
    8:18pm
    Retirement mistakes! I just got my superannuation (negative) report. A portion of my super is invested in cash and term deposits. They invested it at 1.95% !!! They must have tried very hard to get such a low rate of return. I am tempted to write to the ACCC for mismanagement of funds. Unbelievable.
    How are you guys fairing?
    Anonymous
    16th Sep 2016
    1:16am
    They probably invested it around 2.95% and took around 65% profit using your money at 1.95%. Its the price you often have to pay when you outsource your super. Not saying it is right - just saying that is what many of these crews do to their customers.
    Anonymous
    16th Sep 2016
    7:53am
    I have a self managed fund but I think a lot of us struggled as well, have most of mine in interest bearing funds and about 20% in shares
    I obtained about 4% growth but I don"t have any fees to pay to managers.
    Pamiea
    15th Sep 2016
    11:49pm
    GESB (Government Employees Superannuation Board) is running at about 7.6% overall but of course this isnt the case all the time. I have my super in a balanced plan. Perhaps yours is conservative. You have to be the master of your super. Some of my friends in their 60s go for growth but this is a bit more ru sk. Investigate. Can you change funds?? Good luck. Maybe ring your fund and get some advice.
    Gra
    16th Sep 2016
    9:05am
    There is a lot to be said about having your super in a balanced plan. Being in a government fund whether it be state or federal also helps as the funds are there for the members not shareholders. A check on mine this morning shows even after the recent downturns in the stock market my account is still achieving a positive result.
    johnp
    7th Feb 2017
    11:33am
    I can add another mistake to avoid. Keep away from the average retail fund manager and go for an industry fund but first look at the ratings agencies recommendations and the returns reports comparing the various funds !!


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