One of the largest concerns we hear from our clients that are transitioning into retirement is running out of funds. When you’re retired and not earning an income, it can be difficult to know how much you can afford to spend and what is necessary to save for the future. Thus it’s crucial to understand how to manage money after retirement.
This article will outline the most common mistakes people make regarding their finances in retirement, and what you can do to ensure you avoid them.
1. Not Taking Control of your Superannuation
Knowing how you can positively influence your super balance is an imperative part of retirement planning. Your superannuation is likely to be the largest source of money for your retirement. Because of this, it’s important to know what’s right for you when it comes to accessing it.
There are numerous ways you can access your super when you retire. These include lump sum, annuity, or an allocated pension. Finding out which of these is best for your financial situation and structuring them right, can help ensure that your super balance goes the distance.
It’s important to note that Australian’s are now living longer than ever before. This means that you may spend longer in retirement than you originally thought. In turn, you’ll need more funds to last those extra years. Striking the right balance between assets you hold with the job to grow for you and lower risk investments you hold to provide for your short and medium-term income needs, is what matters most to maximising your super longevity.
2. Not Budgeting your Expenses
Having enough savings to ‘survive’ in retirement is different from being able to live and enjoy the luxuries you’ve become accustomed to. However, finding a balance between being able to enjoy your retirement, and having enough to support your living expenses can be difficult to balance.
With proper budgeting and planning, you can ensure that you have the best of both worlds. Consulting with a financial advisor about a retirement plan is a great way to understand your current expenses, and which of those are unnecessary or optional wants that you can prioritise.
With a retirement plan in place, you’ll have greater clarity on how much money you’ll need for bills and essentials. Then you can see how much money you’ll have leftover to spend.
After all, retirement is when we all want to settle down and enjoy the things we love. Being able to do this with peace of mind that you’re not overspending is key.
3. Not Taking Advantage of Government Benefits
In Australia, we are fortunate to have access to numerous benefits and payments from the Government. However, it’s possible you may not be capitalising on these opportunities to have an income stream throughout retirement.
You may be eligible for Government assistance such as:
It’s worth checking in with your financial advisor to find out if you’re eligible for any of the above assistance and if there are any strategies to increase your entitlement. Even something as small as discounts on utilities can make all the difference to your expenditure in the long run.
4. Not Managing your Debts
Considering that financial security is the number one life goal for the majority of Australian’s, there’s no doubt that you’d probably like to be debt-free when entering retirement.
However, it is likely that you may have some form of debt when you reach retirement age; whether that be a mortgage, car loan, or credit card debt. Ideally, aiming to reduce this debt prior to retiring will aid in your ability to manage money post-retirement.
Be aware that if you choose to pay off your debts by selling your home or investment property, your entitlements to Government assistance may be affected. Our “Good vs Bad Debt” article elaborates in-depth on what you can implement prior to retirement, to secure your ability to retire debt-free. You can access this here.
Yield Financial Planning is Here to Help
If after reading this article, you still feel concerned that your finances won’t go the distance, get in contact with the team at Yield Financial Planning. At Yield, we pride ourselves on being retirement experts and can help you implement strategies to manage your money after retirement.
After all, the best financial planning takes place with the guidance of a finance professional. So when it comes to securing your future, make sure you consult with an expert.
