“Fail to plan is a plan to fail”… good advice given to me years ago. Advice, which I have always followed and which has served me well.
The fact is, most people fail to plan, and as they approach retirement, they make bad decisions in a rush to fix past mistakes.
The 5 Most Common Mistakes
1. Not getting a second opinion on your superannuation. Just stick it into the employer fund or an industry fund. Your superfund might charge excessive fees, have limited investment and insurance choices or have no adviser to provide you with crucial information about how much and when to invest or how to best structure your investments.
If you do not hear from your super fund then they are not looking after you.
2. Not having a plan. No financial plan means financial decisions are random, flavour of the month and generally lead to loss of money. While living for the moment and making decisions on the fly may feel good, a lifetime of doing so often results in insufficient savings and an overleveraged lifestyle. It could mean being destitute in retirement.
You can start by identifying where you would like to be financially in retirement and then set small goals. Baby steps.
3. Refusing to scale back. Empty nesters tend to ramp up their spending once the home is paid off and the kids have left. Instead of slowing down and saving, they spend more and save less. That's a mistake, as situations can change unexpectedly and you may not be able to work for another 5-10 years. By not making changes to your lifestyle now, you will likely find it more difficult to scale back your spending when you have no income and have no choice but to cut back.
You can trim back now without too much pain by eating out fewer times a week and socking that money away in savings.
4. Sacrificing your retirement to pay for the kid’s financial problems. Paying their way through University, buying them a car or giving them a house deposit. These activities will leave you short in retirement and reduce the time you have to save for retirement. It is natural to feel guilty about not being able to help your kids more, however, the best gift to your children is to secure your own retirement so you will not need to lean on them later on. You need to find some middle ground regards paying for your children’s lifestyle.
Children need to stand on their own two feet financially; best they start sooner rather than later.
5. Thinking you'll live forever. Many couples' retirement dreams "go up in smoke" when a spouse dies unexpectedly, with the surviving spouse forced to sell the family home, the kids change schools because the family was unprepared for the sudden death of a parent.
To avoid the "double shock" of grieving for a loved one and dealing with a new financial reality, buy term life insurance on both spouses, create wills, and make sure both spouses are informed and ready to make financial decisions in case one dies.
You know that you can buy this through your superannuation to help reduce the impact on your take household cash flow.
Plan to succeed. Take the time to review your financial affairs at least once a year.
Don’t just seek advice make sure you act on it as well.
Planning for retirement can only improve your life.
For more information please contact us on 07 4771 4577.
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