When you embark on anything new, you are bound to make mistakes. But when those mistakes are in relation to money, they can have big implications. So how do you avoid those rookie mistakes when you start your retirement? The first step is to know the common mistakes others have made so you can learn from and avoid them.
No financial plan – Whether you think you have enough money and you’ll be right or you think you can do it yourself, money matters are complicated. It’s best left to a professional to structure a plan for you money in retirement as it could be the difference between a lavish retirement and a basic one.
Failure to plan is the biggest mistake made by those about to embark on retirement. And it shouldn’t be left to the last day. Retirement planning should start much earlier to ensure the you can achieve your goals by implementing appropriate wealth building strategies early.
Money changes – retirement gives access to superannuation. Forced savings for retirement but it doesn’t mean that you should automatically jump to take it out. The superannuation system provides significant tax savings and taking your money out could mean that you now pay more to the tax office.
Alternatively, some just change the investment allocation in super to cash and other conservative assets because they’re in retirement so it has to last. Don’t forget that with modern medicine we are living longer so your retirement investment time-frame could be 20 years or longer. Without some growth during this period, your funds may not keep up with inflation.
Overspending – the thrill of retirement and the ability to access all those savings can sometimes go to our heads. New car, new caravan, holidays are all set for one day but jumping into them all at once when retirement hits could mean you have significantly less to live off throughout retirement.
Budgeting will help with overspending, allowing you to work out what you can and should be spending now and further into retirement.
Retiring too early – without the financial plan (mistake 1) how can you tell if you have enough to live off for your entire retirement? Some retire because it was their goal to stop working at age 60 but rather than do the numbers they end up with a much less quality of life in retirement as they don’t have sufficient assets to fund the life they wanted.
Relying on Centrelink – many think they have worked hard all life and paid taxes and so are entitled to Government benefits to fund their retirement. However, you must understand that the maximum Age Pension benefit available to a couple is around $33,000 per annum combined (as of 2014). In addition, to qualify to receive this maximum pension benefit, you would have to hold under $286,500 in assets outside your home and receiving under $284 per fortnight combined.
A Professional Post by Jenny Brown – Click to Contact Jenny