Planning for your retirement years is an exciting process and a time in which you’ll begin to explore the life that awaits. It’s essential to be granular in your approach to ensure you can live comfortably and achieve the lifestyle you dream of.
We discuss 5 common mistakes made by individuals planning for retirement, providing key considerations to ensure you live your golden years to their full potential.
1. Not considering your Goals
For many, retirement can feel like it’s in the distant future, however as the saying goes, time truly does fly and can place individuals approaching their retirement years without sufficient time to consider their new lifestyle.
Take time to reflect upon your retirement goals, one may want to move to a new location, travel or pursue new hobbies. Determine the age you’d like to retire, and create a roadmap to achieving your aspirations.
Many retirees opt to downsize or move to a location where all they need is on their doorstep. If this lifestyle resonates with your retirement goals a retirement village may be your perfect option. Be proactive in your research, to ensure you can secure your future in a location you love and a price you can afford.
2. Failing to optimise your finances
A key mistake people make during their working years is failing to optimise their savings and investments to create a sufficient retirement fund. Ensure you are up to date on the value of your assets and have sufficient knowledge of your employer’s superannuation policy to maximise your return.
To ensure you have a consistent income throughout retirement speak to a financial advisor to gauge the correct risk-to-return investment portfolio for your ideal retirement lifestyle. Generally speaking, the earlier you begin investing the better, as compounding interest can have a significant impact on the profit of your yearly gain?
See our comprehensive guide to organising your finances ahead of retirement.
3. Underestimating the impact of Inflation
After considering your retirement goals, the next step is to estimate your yearly expenses. Many overlook the rising cost of inflation when creating an estimate which can lead to financial strain later in life.
Since 1993, inflation has risen by an average of 7.4% with year-on-year increases ranging from 0.04% – 4.50%. Considering the average retirement in Australia extends for 20 years, it’s imperative to plan for increased living costs to prevent financial worries.
4. Lacking knowledge of entitlements
There are several different grants available for retirees that many need to realise they qualify for. Ensure you undertake sufficient research when planning for retirement, savings could be as small as reduced transport fees or larger benefits in the form of additional income based on your health, financial or living situation.
A comprehensive overview can be found on the? Government website.
5. Not budgeting for out-of-pocket expenses
Whilst retirement brings an exciting period of exploration and new opportunities it’s common for healthcare costs to rise in later retirement years. Australia’s Medicare service provides free or reduced care to registered patients, however, for major surgeries and treatments, you are required to join a public waiting list, failing to guarantee immediate treatment.
You may also require specific home improvements to maintain independence, for example, installing a stair lift, or emergency services call button. Whilst these costs cannot be predetermined, it’s recommended to take out health and home insurance to cover unexpected bills therefore protecting your assets.
Retirement is a time for new experiences and achieving all you have ever dreamed of. To ensure you can achieve the lifestyle you dream of adopt a fine-grained approach to planning, ensuring consideration of rising costs and unexpected bills. Reflect on your retirement plan, and consider whether you are able to optimise your current investments to maximise your retirement fund.