Six money mistakes to avoid when you are retiring

RETIREMENT needs level headed planning and sensible decision making. Getting it right is crucial and avoiding these common mistakes is essential.

RETIREMENT is one of those cornerstone decisions of life. A decision which can have consequences that last for years.

It needs level headed planning and sensible decision making. Getting it right is crucial but avoiding the most common mistakes is essential.

Mistake #1; Changing your lifestyle in a rush.

Many make the mistake of transitioning from their old working life to their new retirement life way too fast. Do not be too impetuous.

You may be tempted to move closer to the grandkids, buy a place at the beach in Queensland or purchase a motor home and do a “lap of the map”. But too many people dash into these huge decisions without doing a proper budget and understanding the consequences… both financial and emotional.

Catch your breath and move slowly on large decisions. As a general rule, wait a year before making a major change, to give you a chance to experience your life with your new, presumably less robust stream of income.

Mistake #2; Not planning for the unexpected.

It’s smart to have a plan for your retirement, but too many retirees don’t plan to have their life upended. A number of things might happen in your life. Somebody close to you, like an aging parent or a spouse, could get sick and impact your finances in some way. You could get sick. Your child or an ageing parent might move back into your home.

Most people do a good job of planning for the expected but most don’t plan for the unexpected. So make sure you build a reasonable financial buffer

Mistake #3; Loaning money to your adult kids.

We see this so much. While retirement brings access to your superannuation it is becoming a magnet for adult kids who are increasingly seeing it as their parent’s windfall which should be shared with the rest of the family.

Our view is similar to the old saying of legendary Aussie businessman, John Elliott… “pig’s arse”.

Newly retired parents invariably lend their retirement money to children, who are either starting a business, buying a home of simply overwhelmed by expenses or debt. Instead of seeking sound professional advice, retirees act emotionally and impulsively without looking at the potential long-term ramifications.

Remember, this money has to fund your retirement in an environment where the Federal Government will make it increasingly difficult to get welfare. You must not risk it on anyone else.

If you do decide to lend money to your adult kids, be sure to discuss this with your spouse beforehand if you’re married and agree with the kids on how it will be paid back and consequences if they fail.

Mistake #4; Not talking to your spouse about how you each imagine life in retirement.

Have you two talked about how you’re going to manage your money? Or what you’ll both be doing with your free time?

If your expectations aren’t aligned, and they rarely are, work together to find common ground. If you can’t, get help from a professional like a financial advisor or counsellor.

Mistake #5; Taking retirement early.

This is a big one. Do the sums. If at all possible, keep working either part or full time for as long as possible. It can make a huge difference to your eventual retirement benefit.

So many people set a fixed date to retire years in advance rather than wait and see how they’re travelling. Easing in to it while still contributing to superannuation can have a massive impact on your eventual retirement payout.

In fact, the last few years of work have a proportionally bigger impact that the early working years. Look at gradually cutting back hours over a period of time to ease into retirement.

Plus make sure you’re fully aware of all the eligibility rules for aged pension, health and seniors benefits.

Mistake #6; Investing too conservatively.

Yes you should be more conservative with your investments once you retire… that’s true. The time to take big risks was when you were younger and could afford to lose a healthy chunk of money and then regain it

But you can be too conservative. It’s all about balance.

You still want to mix it up a little with your stocks, property, fixed interest and cash… especially if you’re retiring in, say, your early 60s since your life expectancy could be well into your mid-80s.