10 Retirement Mistakes
Australians are likely to be under prepared and make ill-informed
decisions regarding their finances in the lead up to and during
retirement, according survey results from Count Financial Limited.
Count Financial Limited surveyed its network of more than 400 financial
planning firms Australia-wide asking them to rank their clients’
top 10 retirement concerns and the top 10 retirement mistakes Australians
make in relation to their finances (view full results).
The results indicate that Australians are concerned about funding
their retirement but are making poor decisions based on a lack
of knowledge and unrealistic expectations about their future lifestyle.
Baby boomers want to maintain their lifestyle and ‘live it
up’ in their later years. They are living longer and need
more capital to have the lifestyle they want. Everyone wants a
comfortable lifestyle, but Count suggests that Australians may
need to change their attitudes towards retirement saving in order
to achieve it later in life.
So what about relying on the 9% Super Guarantee? Count believes
this is unrealistic - using the example of a 65 year old female
hoping to retire on $40,000 per annum. She will need approximately
$500,000 in super* to do this - well beyond what 9% super can provide
over a working life.
*Figures are indexed at 3% pa to reflect the effects of inflation.
Centrelink entitlements and tax are excluded from the calculations.
Calculations are based on a female retiring at age 65 with an average
life expectancy of 22 years.
According to Count, expecting to receive Government assistance
is also impractical. These days, Count Advisers see many retirees
who are unable to access the Age Pension because they are ‘asset
rich’ but ‘income poor’. They may not be able
to access the Age Pension and if they do, it will be a minimal
amount.
In the survey, 53% of respondents named the number one retirement
mistake as failure to seek financial advice prior to retiring – with
many of the top ranked errors preventable through sought advice.
Count Advisers see retirees who have acted hastily or invested
inappropriately without understanding the long-term ramifications
or tax consequences. As the taxation and superannuation system
are complex, getting professional advice can make a world of difference.
Getting advice will minimise the chances of making poor decisions
and ultimately prolong your retirement income.
Survey Results (as rated by Count Advisers)
Top 10 most common client concerns regarding retirement finances.
| 1. | Savings will not last through retirement |
| 2. | Will not be able to maintain current lifestyle or afford luxuries |
| 3. | Unsure how much is needed in retirement |
| 4. | Unsure how much Government pension will be available when they retire |
| 5. | Volatility – if they lose capital, will not be able to recover in retirement |
| 6. | Unsure how to invest or what to do with assets |
| 7. | Financial security of spouse when partner passes away |
| 8. | Accessibility of Pensioner Card |
| 9. | Whether or not to make additional contributions to super pre-retirement |
| 10. | Whether or not to downsize home |
Top 10 mistakes
Australians make in relation to retirement finances.
| 1. | Failure to seek professional advice prior to retirement |
| 2. | Investing inappropriately based on lack of understanding of risk and return |
| 3. | Cashing out lump sum Eligible Termination Payments inappropriately |
| 4. | Failure to save enough pre-retirement |
| 5. | Leaving assets in non-income producing investments |
| 6. | Timing retirement ineffectively for tax or investment purposes |
| 7. | Selling investments when market falls and buying in peak |
| 8. | Investing inappropriately due to lack of understanding of asset classes and suitable allocation |
| 9. | Expecting to maintain similar income level post-retirement |
| 10. | Assuming will qualify for Age Pension |
How much capital
is required for retirement income?
| Desired annual retirement income* | Capital required if earning 6% pa | Capital required if earning 8% pa |
| $60,000 | $964,639 | $808,144 |
| $50,000 | $808,866 | $673,453 |
| $40,000 | $643,093 | $538,762 |
| $30,000 | $482,320 | $404,072 |
| $20,000 | $321,546 | $269,381 |
*Figures are indexed at 3% pa to reflect the effects
of inflation. Centrelink entitlements and tax are excluded from
the calculations. Calculations are based on a female retiring at
age 65 with an average life expectancy of 22 years.
People are living up to a third of their lifetime in retirement – a significant length of time to leave up to chance. Speak to your Count Adviser today about securing your future.