Three steps to feel more in control when retiring
For many looking to retire, a mix of health concerns, market volatility, rising cost of living and employment disruptions over the past two years have raised more concerns around when is the right time to retire.
A recent survey found:
Many Australians intend to retire six months later than they did in 2020.
Australians expect to retire with $100,000 less in retirement savings
Total retirement expectations have fallen from $500k to $400k
The number of Australians who expect a comfortable retirement has fallen by 10%
50% of Australians don’t know how much they will have or need to retire.
66% of those aged over 65 are concerned about having too much debt
Some of these findings are scary and concerning. However, our Newcastle Financial Planners see this all too often and we believe that it is from a lack of financial literacy and understanding. For many Australians there is an awareness gap between their finances and the retirement system.
The cost
35% of Australians have changed their retirement goals due to the impact of the global pandemic.
However, recent economic trends, including higher living costs, rising inflation and volatile investment markets, are now dominating people’s thinking about retirement. With many concerned about how higher costs will affect their retirement lifestyle.
Furthermore, 50% of 50-59 year olds are concerned with the rising costs and the impact inflation inflation can have on their retirement. Many nearing retirement feel they haven’t saved enough to cope with these rising costs.
Many pre-retirees also feel like they have left their retirement planning too late.
With research showing that a growing proportion of Australians being worried that they wont have enough savings for retirement, with a $200,000 gap between how much they expect to retire with and what they think they will need. Most expect to retire with around $400,000 in their nest egg, but believe they will require closer to $600,000 to meet their retirement lifestyle needs.
The fear of running out of money is real and understandable, however our Newcastle Financial Planners continuously work with their clients to ensure they understand their capital longevity and the impact of the decisions they make.
Retirement needs are highly personal and our Newcastle Financial Planners support our clients through education to ensure they understand their individual retirement needs and how they will be meet.
While many don’t know how much they will have saved for retirement and how much they’ll need in retirement, encouragingly, the number of people starting to think about their retirement plans is increasing.
This being said, most Australians are not prepared to compromise the lifestyle they have dreamed of in retirement.
Many have reduced their current spending, whilst some say they will continue to work for longer to avoid a lifestyle downgrade once they finish work (however in our experience, this is a group that also don’t want to retire and have not planned out their retirement), whilst a small group would be happy to re-adjust their lifestyle expectations to ensure they could retire sooner rather than later.
The past two years have increased people’s fears that retirement will not live up to their expectations and that their non-work lives will be hamstrung by financial concerns.
Have the end in mind
As illustrated above, our Newcastle Financial Planners tend to work backwards with our clients, with the end in mind. Partnering with you to work out how much you need each week to live in retirement. Splitting the income needs up, between basic income needs, comfortable living needs, holiday/additional needs.
Once we understand how much you require at each level, we are able to work with you to put in place a plan to achieve these goals and layer your income.
This may include using your superannuation, age pension entitlements, property income, investment income, annuity income, part time work, as illustrated below.
Emotional Roller Coaster
Retirement is often a massive life change for the majority of people who experience it. Most of us will have mixed emotions around the end of our working life and the beginning of our 'second half'. For some it will be a relief, and something they have long planned for and are looking forward to, but for others it will be a source of anxiety. This anxiety could be due to many factors including, but not limited to, concerns around the potential for running out of money, feelings associated with a lack of confidence or a lack of control.
This chart is a useful illustration of what range of emotions are possible during a retirement journey.
The green line shows that the emotional experience of a well-planned and prepared retiree is usually fairly steady with low stress levels and a generally positive emotional experience.
In contrast, the journey of the reactive retirement is much more variable where the lack of planning can lead to significant swings in lived emotional experience.
The journey of the person forced into retirement through an unplanned redundancy is much more unpredictable and can be a difficult period from an emotional perspective. However, it can also be turned around with the right mindset and often with the help of a good financial planner, as the alternative paths highlight.
Three steps to feel more in control in retirement:
Find your bearings
Start by clarifying where you are financially, including your current and projected superannuation balance at retirement, house value, any other investments and debt.
Set goals
Take the time to establish what lifestyle you are hoping for in retirement.
For some, this may include planning out what you are going to be doing in retirement, considering your new purpose, value and life.
Get help from the retirement experts
Retirement can be a minefield that can be a complex transition. So take advantage of online resources to educate yourself. If you need further assistance speak to your Newcastle Financial Planners
Source:
https://www.firstlinks.com.au/five-steps-ease-retirement-stress-foro
https://corporate.amp.com.au/newsroom/2022/september/retirement-fears-on-the-rise--australians-expect--200k-shortfall
https://www.fidelity.com.au/insights/investment-articles/retirement-planning-its-not-all-about-the-money/?mkt_tok=NDIzLVpaRi0zMzQAAAGHjD6Omt4M_rV1ngTRECiWkIo-8sI9YUm0CUQsNuoPXlCksWSUZq4IbPj4rHuMZdABXmQMNMyPGIGeHhDHXVTuK97_-X17dFab1V1BvdY
https://www.fidelity.com.au/insights/investment-articles/retirement-the-now-and-the-then/