“I’m 57 years old and wanting to know some of the more common mistakes people make when planning for retirement and how to best avoid them."
-Question from Belinda in Fremantle, WA
Top answer provided by:
Patricia Soares Garcia
Hi Belinda,
Great to see you're thinking about retirement planning. The earlier you plan the better! The biggest feedback I get from my pre-retiree and retiree clients is “I wish I came to see you sooner”.
Some of the common mistakes when planning for retirement include:
1. Starting Late
The earlier you start, the more you can take advantage of compounding interest.
You may be able to take advantage of superannuation tax concessions in preparation for retirement that can boost your retirement savings.
You will be in a better position to understand what is achievable and realistic in terms of your retirement goals and make adjustments along the way.
If you seek financial advice early you will be more educated and empowered for a smoother and easier transition into retirement.
2. Underestimating Expenses
A lot of people assume they'll spend less in retirement. This may not be the case. A lot of people also have no idea what they actually spend and if they don’t track their expenses it is very common they would significantly underestimate their expenses. It is critical to know how much you need to live on when planning for retirement.
3. Ignoring Inflation
Prices go up. Make sure your investment strategy takes that into account.
4. Being Too Conservative or Too Risky
You don't want all your eggs in one basket, but you also don't want to be too safe and miss out on growth. The key is setting up your portfolio to meet your specific needs, goals and risk tolerance.
5. Not Reviewing and Adjusting
Life changes. Your plan should too. Make sure you're reviewing your strategy regularly.
6. Forgetting Healthcare
Healthcare can be a significant cost in retirement, so factor it into your plans.
7. Not Structuring Your Assets Tax Effectively
Different investments and structures are taxed differently. Speak to a financial adviser to get the most from your money.
8. Lack of Diversification
Don’t put all your eggs in one basket.
9. Ignoring Estate Planning
Not the most cheerful topic but sorting this early saves a lot of heartache later on and can also save a lot of tax.
Avoiding these mistakes mainly comes down to being proactive, staying educated, and getting good advice. A financial adviser can help you navigate through all these complexities.
Hope this helps, Belinda!
Note: This is general advice only, not tailored to your individual circumstances. You should consult a qualified financial adviser for advice specific to you.
Cheers,
Patricia Garcia
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.
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