8 Common Retirement Mistakes and How to Avoid Them

For the most part, we all look forward to our retirement because this is a chance to seize additional hobbies, travel, and even engage in charity work or part-time employment.

We are retiring with greater savings than earlier generations and have higher expectations for the lifestyle we want to lead because of more than 30 years of mandatory superannuation. But that has its own difficulties as well.

Australia’s typical retirement age is between 62 and 65 years old, according to the government’s Retirement Income Review. The average life expectancy for men and women in their 65th year is currently 85 and 88, respectively, and many will survive well into their 90s.

In order to maximize your retirement years, it’s crucial to have assurance that your savings will go a long way. Having a retirement plan is one of the best ways to achieve success and enjoy life in your senior years. Financial planning will help you avoid some of the most common retirement mistakes. 

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Retirement Mistakes That People Make

Future financial obstacles are impossible to foresee. The following are some retirement mistakes that remain the same.

1. Not knowing your living costs or current budget.

When you have a steady income, you might pay less attention to keeping track of your living expenses. You may not be aware of whether your investment income and/or pension payments will cover your lifestyle expenses when your regular income stops at retirement.

Being aware of your living expenses before retiring will allow you to set reasonable expectations.

2. Not reviewing your Super until just before retiring.

What if, during the course of your working career, your superannuation was invested in safe assets? It can imply that your retirement funding would not have increased enough to fund your retirement. Thanks to your super. What if the insurance premiums and costs for your superannuation were credited to your returns? 

To make sure your ‘super’ account is suitable for each stage of your life, it is essential to examine it as soon as possible and on a frequent basis.

3. Underestimating the Effect of Inflation.

Inflation in Australia was between 1% and 3% per year from June 2012 and the beginning of 2020. Inflation has increased to more than 7% since the start of the global pandemic in March 2020. This situation, a disruption to the global supply chain and the Russia-Ukraine war, has lifted the cost of living to levels that require you to reassess your retirement planning.

4. Not being aware of your government entitlements.

You may be eligible for a full- or part-Age Pension when you’re 66 or older. Even so, you can still be qualified for other benefits if your level of wealth takes you above the pension limits. Seniors Cards, Pensioner Concession Cards, Income Tax Offsets, and Pensioner Stamp Duty Exemption/Concession are a few examples.

5. Allowing distractions influences your financial choices and decisions.

Bad news makes headlines, like reports of billions being lost on the markets, but you hardly ever read about the billions made during the recovery. There is no doubt that there are times of uncertainty that cause financial markets to be volatile. The market, however, tends upward in the long run, as history has demonstrated. It can be challenging to stick to your long-term plan amidst all this noise, even though similar situations can also offer market opportunities. 

6. Attempting to time the market fluctuations.

Legendary stock investor Warren Buffett declared, “We haven’t the faintest idea what the stock market is going to do when it opens on Monday — we never have.”

If you made a $10,000 investment in the ASX 200 index while attempting to time the market and missed the 40 greatest days between October 2003 and October 2022, your investment would be worth $9,064, as opposed to $46,099 if you had stayed fully invested. 

It’s never a good idea to try to time the market, especially with your retirement money.

7. Having many assets but little money.

Despite having a healthy balance sheet of assets, income is what you need in retirement, not assets. The family house may be the biggest asset for many Australians and downsizing into a smaller home can occasionally unlock its value. Nevertheless, many Australians continue to live in their family homes despite the fact that their values have increased while they struggle to make ends meet. Are your assets producing enough money to maintain your standard of living? Rent from an investment property, dividends from shares, or distributions from managed funds can all be included in this income. If the income is insufficient, you could need to sell some of your possessions to generate the necessary cash flow, or you could use the equity in your house by taking out a reverse mortgage-style loan.

8. Not seeking advice from experts.

By negotiating the complexity of superannuation, investments, ongoing regulatory changes, and other factors that affect your retirement, financial planners, accountants, and other financial specialists can help put you on the right track. If executed properly, a smart retirement plan can give you a lifetime of security.

Begin Planning For Your Retirement

Too many people make the same mistakes as they approach retirement, whether it’s due to a lack of knowledge or time, which can result in unpleasant financial surprises.

It is important to plan ahead for a stage of life that you have been eagerly anticipating. Therefore, if you want to examine your retirement income needs, please get in touch with the experts.

We look forward to helping you to ‘Bringing Wealth to Life‘.

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