Over60
Retirement Income

5 retirement derailers and how to avoid them

The business of working life means retirement can sneak up on us. For the unprepared, the speeding train can quickly fall off the tracks – with potentially devastating consequences.

Thankfully, if you know what to look for and how to prepare, you can reach your retirement destination safe and sound:

  1. Failing to plan

Failing to plan means planning to fail.

Ideally, you haven’t put off having a spending and investment plan until now. So, what’s needed is to update that plan.

Your update should cover:

  1. Poor super strategy

Superannuation should never be set-and-forget – before or in retirement.

Before retiring, look at maximising your super’s value – including spousal contributions and co-contributions for low and middle-income earners. There are loads of other strategies too.  This money gets invested for faster growth, while delivering you tax concessions now.

Then determine how and when to begin drawing from it. Avoid the temptation to go big and risk blowing it all early, leaving nothing to support you in your later years. Check in regularly to ensure continued growth – potentially even offsetting what you’re withdrawing as income.

  1. No stable home

"Older households that were not able to access or sustain home ownership when they were younger are more likely to face high housing costs in their retirement than similar households who are home owners," a Parliamentary paper notes. 

The family home is effectively our only tax-free asset (save for buyers’ stamp duty). Its equity can be leveraged to fund other income-producing investments – property rents, share dividends etc. Or it can be sold, allowing you to downsize comfortably and still have money left over.

Home ownership also offers stability when you need it most – moving is more cumbersome as your years advance, plus securing rental accommodation is usually harder when you’re no longer working.

It needn’t be much, but owning property keeps many doors open to you in retirement.

  1. Inadequate estate planning

There are two major mistakes around estate planning: 

Work with your team – lawyer, financial adviser and accountant to ensure your estate planning is done tax effectively and your loved ones won’t see their inheritance gobbled up in tax or other costs.

  1. Insufficient protections

Just because you are or soon will be retired, doesn’t mean you don’t need protections. Arguably, you need them even more.

Retirement should be enjoyable. Yet by not planning ahead, your twilight years could run off the rails. Investing a little time and effort now is sure to pay big dividends during your twilight years!

Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at www.onyourowntwofeet.com.au 

Image credits: Getty Images

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retirement, income, derailer, avoid