Ask An Adviser - What Are Common Mistakes When Planning For Retirement? (2)

Top answer provided by:

Chris Smith

View

Hey Belinda,

Some of the most common mistakes I see are people not planning for their retirement, or waiting too long before they plan for retirement.

Assess

First thing I see people having lack of understanding around is the income you need in retirement. Most people I meet significantly underestimate their retirement income requirements and thus underestimate the assets needed to generate that income. Income in retirement will be different for everybody and will depend on the lifestyle you are looking to achieve. I find it helpful to determine what kind of lifestyle you are going to want in retirement, and then you can work backwards as to where to generate the income from.

Debt

I find that a lot of people have not considered how to retire their debt before retirement, be it personal debt like a home loan or investment debt like debt for an investment property. How you manage your debt, when you retire the debt and the best cashflow starter to manage this is a critical part that a lot of people don’t take into considerations.

Superannuation

When planning for your retirement, superannuation is the greatest gift to fund your retirement income needs. When planning for your retirement, understanding what super you have, how it’s invested, what your fees are and what strategies can be used to increase your tax-free income in retirement is imperative. Superannuation is your money; you can invest in a wide range of asset classes, not just shares, and it is a beneficial tax structure that needs to be fully utilised.

Age Pension

Another important factor when considering retirement is understanding what Age Pension Entitlement you are going to receive, how to maximise any potential benefit you are going to receive and when are you eligible. I see too many people miss out on entitlements and use their own capital or miss out of key government benefits because they did not understand the rules when it comes to the income and assets test and did not structure their assets in a friendly manner. 

And most importantly, ask questions, read a little. In this age there are a lot of resources to help people make smart decisions with their finances and all going well, you will be retired in the workflow for a good 30 odd years, so a plan is essential.

While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.

Article by:

Adviser Ratings

Was this helpful content?Let others know - share and vote-up