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.
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