When you’re in your 50s and 60s, you know you’ve worked long and hard for what you’ve achieved in life and probably have a fair idea of how you want to live in your future retirement. But it’s important not to become complacent and ignore the warning signs of not having enough money for retirement.
Here are some common money mistakes and suggestions on how to avoid them:
1. Accessing super too early
One of the most common mistakes people make is to start using their super too early, such as when they reach their preservation age. This can leave a significant shortfall in retirement savings when you need it most.
To avoid falling into this trap, ask yourself:
• How long am I going to need to live on my retirement funds?
• How much money do I have saved in my super now, and is it enough?
• What other sources can I draw on to supplement my income?
If you’re not sure about the answers to these questions, read about going the distance in retirement or how much super do I need? Use the super simulator to work out how much you could save by making extra contributions to your super.
2. Underestimating retirement
Another common oversight is not preparing well enough in advance for retirement. Learn about how to prepare for retirement and then start thinking about ways you can boost your retirement savings now.
One way to save more for retirement is to consider a transition to retirement strategy. If you are aged 55 or over and still working, you can either work less hours for the same income or work the same hours to give your super a tax-effective boost. Talk to a financial adviser to find out if this strategy is right for you.
3. Counting on the Age Pension
Some people think they will be able to survive on the Age Pension, but this will only provide a basic standard of living in retirement1. If you want to be able to afford a few luxuries, such as a new fridge or the occasional holiday find out about saving for a comfortable lifestyle in retirement.
4. Not claiming on entitlements or government benefits
Be aware of any entitlements or what you can claim to stretch your dollar further in retirement. Find out now if you will be eligible for government benefits or other payments by reading making the most of your retirement entitlements.
5. Being unaware of investment risks
Just because you’re nearing retirement doesn’t mean you should put your retirement savings at risk for the sake of higher returns. Make sure you have a diversified portfolio and are aware of things to watch out for when you are investing and retirement investment risks. You might also want to watch our video to find out more about how to invest in your super.
6. Supporting adult children and aged parents
People in their 50s are sometimes referred to as the ‘sandwich’ generation where they’re tasked with looking after their own children, as well as their elderly parents. Read about how not to put your retirement plans at risk when the kids won’t leave home or to fund aged care options.
7. Prioritising home loan debt over other debt
It’s no use building savings, if you still have financial pressure from other debts hanging over your head in retirement. Think about prioritising other debts before tackling your home loan debt, or consolidate all your debts into a home loan with a lower interest rate. Check our our education module on paying of debt.
8. Not having a valid, current and legally binding will
Having a valid, current and legally binding will removes the burden on loved ones and avoids any confusion after your passing about how you want your assets to be distributed. If you decide to make your own will, make sure it is checked by a solicitor, otherwise your beneficiaries may not be entitled to receive any of your estate.
Also, check your appointed executor knows exactly where your personal documents are kept and that they are aware of their responsibilities.
Still need help?
If you’d like help with any of these areas, find a financial adviser.