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 $645,000 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.

Top 10 mistakes Australians make in relation to retirement finances.

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

$966,641

$796,642

$50,000

$805,534

$663,868

$40,000

$644,428

$531,095

$30,000

$483,321

$398,321

$20,000

$322,214

$265,547

*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.

CASE STUDY – STEVEN W. – RETIREMENT ADVICE

Steven is a current client who is starting to seriously consider retirement. He came to our firm for advice as to whether or not he would be able to retire comfortably considering his current level of superannuation and other assets.

After discussing Steven’s goals and objectives in detail we determined that he was a perfect candidate to implement a transition to retirement strategy that, if he considers continuing working on for two or three more years, has the potential to significantly improve his retirement savings prior to retirement.

swebbergraph

Steven now has a ‘strategy roadmap’ in the form of a detailed Statement of Advice that shows him it is possible to significantly increase his retirement savings over the next 4 years by implementing the transition to retirement strategy that GC Accountants tailored to his specific circumstances, effectively giving him the power to make informed decisions about his future.

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.

Contact Us