Your three biggest retirement advice questions, answered

Cobbling together financial advice without paying for it seems to be a national pastime in the lead up to retirement. Everyone has questions they want answered and more often than not, they don’t get professional answers that are specific to their own circumstances.

When I asked my community why they don’t seek financial advice, most people cited a lack of trust, fear of the cost, and uncertainty about the value they’d receive both in the short and long term.

Financial advice can seem like a maze to navigate.Credit: Simon Letch

Despite these concerns, they still have questions and want answers. So, this week, I crowdsourced the biggest financial questions from The Epic Retirement Club Facebook Group, ranked them by popularity, and prepared factual, education-based answers to the top three.

I threw the top six questions at fellow columnist and financial adviser, Paul Benson this week in the Prime Time podcast too - so you can hear a different perspective here.

So, let’s unpack the three most popular questions in detail.

1. What is considered a reasonable annual fee to see a reputable financial adviser?

This is a question that most advisers answer, to my great frustration, with the answer, “it depends!” And, fact is, it does depend on quite a few different variables.

It depends on why you want advice – and whether you’re looking for advice to address a single issue, or advice to review your whole financial situation and tell you what you can do. It also depends how complex your situation is, how much work is involved in delivering your statement of advice, and on the investment strategies that will be implemented as a result of the advice.

Talking to advisers, the cost of independent advice is usually broken down into three bands within their firms:

1. Simple advice: This involves addressing a single issue or a straightforward financial situation that needs clarification. The cost for this type of advice typically ranges from $1500 to $3000 upfront.
2. Complex advice: This is the most common type of advice for people who have a significant life event and want to understand the impacts, if they don’t have complex investments and structures. The usual cost is between $3000 and $5000.
3. Comprehensive advice: This offers an in-depth analysis of all aspects of your complex finances, goals, and future plans. Expect to pay between $5000 and $10,000, depending on the complexity and the adviser’s expertise.

Then you need to consider the ongoing cost of implementing the advice, which could include an ongoing advice fee of 1 per cent to 1.5 per cent for the adviser, plus 0.5 per cent for investment platform fees, and 1 per cent to 1.5 per cent for funds management fees if you enter into managed investments.

Some advisers, not all, will offer the upfront advice for free if you take up an ongoing advice service. It’s also worth pointing out that if you’re with a major superannuation fund, you’re probably already paying for access to superannuation financial advice in your annual member fees.

In addition to this, some funds charge a small fee for retirement advice services for members to set up their strategies for combining the age pension with an account-based pension and putting it all in place. This can be a suitable option if your needs are simple, you are happy with your fund’s fees and performance and don’t need a completely independent view.

2. Should I pay off my mortgage quicker or put that extra money into super instead?

Let’s look at this with some financial logic. The top ten growth funds in Australia in the accumulation phase averaged a return of 7.76 per cent over the last ten years. And, the first $30,000 you put into superannuation each year goes in at just 15 per cent tax rate. It’s called a concessional contribution.

In comparison, the average interest rate being paid on a mortgage in Australia right now is 6.27 per cent and your mortgage is paid with after-tax money.

The real key to deciding whether to pay down your mortgage is understanding how long you have until you will be able to draw on your super to pay that mortgage down later, and whether you want to take the tax concessions and the risk of returns dropping, and put that money out of reach until you’re eligible to draw it down.

Some people with only a few years to go might see it as a good opportunity, particularly if you are lucky enough to get good short-term returns. Some would rather see their money in their redraw account. It’s worth contemplating your bigger picture and getting advice.

3, How much do I need to retire early – and what are the financial pros and cons?

This is a question that you can research and start to understand yourself before you get more detailed advice with four simple steps.

First think about how long you might live – giving you an idea of how many years you’re budgeting for.

Then, build your ideal retirement cost-of-living budget using an excel spreadsheet – access a template on my website. You do this by considering what you want or need to spend every year in active retirement, usually your most expensive years, to meet your desired standard of living. This should be an amount you want access to in every year after you retire, and frankly, you’ll need to know this number if you go to see an adviser anyway – so it’s worth working through it.

After that, work through your retirement goals. List them all out and work out a cost per year in today’s money that you want to add to your budget for seeking out your goals. Then, get out your superannuation statement and have a good look at your total balance.

Finally, take these numbers, and run them through a retirement calculator. The Moneysmart retirement calculator will give you a great start. Test out a few different scenarios to understand how close you are to having ‘enough’ to achieve your goals, according to the calculator. It’s a great way to get more familiar with the numbers that underpin your retirement divisions.

And, with these numbers all prepared, you’re then well-positioned to get advice and ready to answer the questions an adviser needs to ask to be able to work through your strategy.

Bec Wilson is author of bestseller How to Have an Epic Retirement. She writes a weekly newsletter at epicretirement.net and is the host of the Prime Time podcast.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.

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