Ten key steps to help you make your retirement the best years of your life
Too often Australians approach their retirement years with dread. They fear they won’t have enough money to live on and worse still, that somehow, they will run out of money when they most need it.
In writing The No-Regrets Guide to Retirement: how to live well, invest wisely and make your money last, I want all Australians to know they can have the retirement of their dreams and live a happy, wonderful life after they stop work.
I also wanted to help as many Australians as possible, avoid some of the more obvious pitfalls, that can lead to financial heartbreaks and the sort of regrets that can last the rest of their lives. Hopefully some simple tips can stave off the more obvious disasters.
Tip 1. Don’t Grow Old and Grey. Go Harlequin!
Don’t live your retirement the way your parents did or according to some out-dated rule book. Most importantly, don’t skimp on the here and now, so you can leave a nest egg for your children. Retirement is your big opportunity. Make the most of every single day
Tip 2. Your ‘Half a Million’ Retirement Nest egg
Every Australian is eligible for the age pension. While it is means tested, this is the equivalent of having $500,000 in retirement savings. More, its secure, indexed for inflation and you will never lose it – it’s your long-lost retirement nest egg.
There’s too much talk in the financial planning industry that you need a million dollars to retire. Don’t give up on your financial situation. There are still lots of strategies to help you make the most of your financial position and taking advantage of the age pension is one of them.
Tip 3. Make Good Choices
Just as a healthy diet focuses on good food choices, so you should choose good investment options. Think ‘high yielding dividends’ spiced up by ‘franking credits’ and served with a dish of ‘capital growth‘ on the side.
Retirement is a time in your life to make god decisions about your health, about staying fit and thinking long term. That’s the case for your finances as well. Make healthy financial decisions.
Tip 4. And give up the (financial) smokes!
A key downside of the financial industry focusing so much attention on people needing a million dollars to retire is that it makes people anxious and this in turn prompts many to take risk with their money.
Your precious retirement savings are irreplaceable. Don’t put your money into anything you don’t understand and remember retirement is all about generating as much income as you can as safely as possible with some capital growth.
Tip 5. Live Like A Millionaire
Learn to live off investments just like millionaires do. As John Travolta once said, “I learnt very early how millionaires live. They never spend their capital, just the income it generates, and they always get good advice”.
Make sure you know exactly how much money your investments are generating and adjust your spending each year to stay within those limits. That’s the key of making sure you never run out of money.
Tip 6. ‘Slide’ Into Retirement
These days, few people just stop working at age 65. Find a new mojo and slide your way into retirement. Find a side hustle, volunteer or turn a hobby into a business - you just need to find your groove.
If you can monetarize these activities or find a way of making some additional income from them, it will take some of the financial pressure off you in retirement and help make your money last that much longer.
Tip 7. Families – Love ‘Em and Leave ‘Em
While families can be a great source of happiness as you grow older, they can be a massive financial burden. Never speak to your family or love ones about your financial situation except in the most general terms and never allow your savings to become part of regular conversations.
This only encourages others to think you will always have a few dollars to spare to help them out. That may or may not be the case, but it should be your decision. It should not be your family pushing you to give them cash.
Tip 8. Sexually transmitted poverty
It’s surprising how often love lives and financial affairs become intertwined. If you are living alone, step up and make sure you take control of your financial situation and make sound decisions about what you do with your money.
Be wary of romantic involvements and the scams that can come with them. Everything from sending money to on-line romantic encounters to backing your partner in a new business deal. Make sure you do your homework and look upon any money you give someone as a gift and not a loan.
Tip 9. Build your “Escape Hatch”.
Make sure you have a strategy outlining what you will do if all goes wrong. Again remember, you will always qualify for the age pension and you can’t lose it, its indexed for inflation and it will last as long as you do.
Tip 10. Most importantly enjoy your retirement
Make good decisions to maximise your income in retirement and then get on with enjoying life. Do not make the mistake of spending all day, every day counting your pennies. There are more important things to do in life than that.
Written by Patricia Howard
Patricia Howard, author of The No-Regrets Guide to Retirement: how to live well, invest wisely and make your money last (Wiley), is a licenced Australian financial adviser. She has a Commerce Degree from the University of Melbourne, holds her own Australian Financial Services Licence and recently passed the FASEA Financial Adviser exam. Find out more at www.patriciahoward.com.au
Note this is general advice only and you should seek advice specific to your circumstances.