Ten financial mistakes to avoid when retiring
What is retirement?
Retirement is the point at which a person stops working, either due to age or personal choice. It marks the end of one's career and the beginning of a new phase in life. For many people, retirement is a time to relax, travel, and enjoy hobbies and activities that may have been put on hold during their working years.
It can be a time of excitement and anticipation, but it can also be a time of uncertainty and financial insecurity, as individuals may no longer have a steady income from employment. To help ensure that they have the financial resources they need during retirement, it is important for people to plan and save for their later years.
In many countries, people are eligible to receive government-provided retirement benefits or pension payments once they reach a certain age, typically between 65- 70 years old. These benefits are intended to provide financial support to individuals during their retirement years, when they are no longer earning a regular income from employment.
There are several factors to consider when planning for retirement, including one's age, income, savings, and expenses. It is important to set financial goals and create a budget that will allow one to live comfortably during retirement.
One way to save for retirement is to contribute to a retirement savings account, such as superannuation. These types of accounts offer tax benefits and allow individuals to set aside money for their later years. It is important to start saving for retirement as early as possible, as the earlier one starts, the more time there is for the savings to grow.
Another aspect of retirement planning is investing in other financial vehicles, such as stocks or real estate. These investments can help individuals accumulate wealth and provide additional income during retirement. It is important to consider one's risk tolerance and financial goals when making investment decisions.
Retiring can also involve making lifestyle changes, such as downsizing one's home or finding ways to reduce expenses. It may also involve finding new ways to occupy one's time and stay active and engaged. Some people choose to travel, pursue hobbies, or volunteer their time and skills to causes they care about.
Retiring can be a significant life change, and it is important to take the time to plan and prepare for it. By saving and investing wisely, individuals can ensure that they have the financial resources they need to live a fulfilling and rewarding retirement.
It is important to retire on your terms and limit any financial mistakes
Retiring on one's terms means retiring in a way that aligns with one's personal goals and desires. This can involve having the financial resources to retire when one wants to, as well as being able to retire in a way that allows one to pursue one's interests and maintain one's desired standard of living.
Retiring on one's terms often involves careful planning and saving for retirement. This can include setting financial goals, creating a budget, and contributing to a retirement savings account.
Retiring on one's terms may also involve making lifestyle changes, such as downsizing one's home or finding ways to reduce expenses. It may also involve finding new ways to occupy one's time and stay active and engaged, such as pursuing hobbies, volunteering, or traveling.
Overall, retiring on one's terms means having the financial and personal freedom to retire in a way that aligns with one's goals and values.
Furthermore, to ensure you are able to retire on your terms, it is important to avoid making financial mistakes when retiring:
Limited time to recover from financial losses: During retirement, individuals no longer have the opportunity to earn a regular income from employment, so they must rely on their savings and investments to support themselves. If they make financial mistakes that result in losses, they may have less time to recover from those losses compared to when they were working.
Reduced income: Making financial mistakes during retirement can also result in a reduced income, which can make it difficult to meet one's financial needs and maintain one's standard of living.
Increased risk of financial insecurity: Financial mistakes during retirement can increase the risk of financial insecurity and make it difficult to meet one's financial goals. This can be particularly concerning for individuals who are relying on their savings to support themselves during retirement.
Limited time to rebuild savings: If financial mistakes result in significant losses, it may be difficult or impossible to rebuild one's savings to the same level, especially if there is limited time remaining in one's retirement.
Overall, it is important to be careful and thoughtful about financial decisions during retirement in order to avoid making mistakes that could have long-term consequences.
Ten mistakes to avoid when retiring
The ten most common financial mistakes our financial planners witness when people are retiring:
Not understanding their budgets or how much they require each week
Withdrawing money from superannuation, where their monies were taxed at 0%, only to have the money taxed at marginal tax rates
Not understanding superannuation and confusing the tax vehicle with a product.
Not investing wisely - and/or sitting on significant amounts of cash that is getting eaten away by inflation and tax
Over capitalising on your home - Struggling financially to ensure they hold on to a large family home which is no longer meetings their needs
Poor tax planning - Not understanding your entitlements (and finishing in a new financial year to take advantage of the tax free thresholds in a new financial year).
Not managing your debts - having to then use your retirement savings to ensure you are debt free
Spending your retirement savings on your kids
Not understanding the potential death benefit tax their family will inherit
Not accounting for the psychological impact retirement may have on you.
You can learn from other people’s mistakes or you can make the mistakes yourself.
The benefit of partnering with a Newcastle financial planner to plan your retirement, is that they will be able to support you in minimising or avoiding costly financial mistakes heading into retirement, with the experience and knowledge of learning from the mistakes they have seen hundreds of retiring Australians make over the past 15-20 years.
Meet The Author
Matthew McCabe
Matthew McCabe is an expert financial planner who has been in the financial services industry for over 18 years. He specialises in supporting everyday Australians retire on their terms by making the complex seem simple.
Matthew is the founder of Newcastle Advisors, an organisation that is dedicated to empowering individuals through financial literacy and education, to ensure Australians have the tools and information to make an informed decision about their financial future.
Matthew has also been a finance expert contributor to the Newcastle Herald, Channel 7 News, Canberra Times, Starts at 60 and Hunter Headline.