By Robert Northcoat
Regret is regrettable, but some feel that it is just a part of life. You might regret spending too much on a car or wish you hadn’t wasted so much time when you were younger. Some regrets are inconsequential, but for others, like retirement, the stakes are higher.
One thing you don’t want to regret is retiring. You spend decades saving and planning and looking forward to your retirement years. However, what if you get to retirement and it’s not all it’s cracked up to be? Have you considered that you could regret your decision to retire? Here are four common retirement regrets to keep in mind as you prepare to say goodbye to your working years.
1. Retiring Too Soon
Whether you were forced to retire earlier than planned or you decided on your own, retiring before you are ready can cause plenty of regrets. More than 25% of Australia retirees who retire before turning 60 go back to work. (1)
Many plan to work until they are 65, but the Australian Bureau of Statistics tells us that the actual average age Australians retire 55.3 years. That number is creeping up, though, with more recent retirees falling closer to the 63-year-old mark. (2) If you retired before turning 65, you will wouldn’t qualify for the age pension, which is available between the ages of 65 and 67 depending on when you were born. That means you will probably need something to fill that income gap. Most people turn to their superannuation fund, but that has its own set of rules. So, when you can access your super depends on your age as well as employment. You can check when you can get to your super and when you might qualify for a pension here.
In doing the math, the earlier you retire, the fewer years you have to save, and the longer you have to live off of your savings. If this is keeping you up at night or you are considering living at a lower quality of life than you would like, you may regret retiring when you did.
Working even a few years longer can provide these valuable benefits:
- More time to accumulate savings. Push out the retirement date.
- How about doing a few part-time gigs to supplement your income? You may also qualify for the Work Bonus if you are over Age Pension age.
- Purpose and identity: A mate of mine, Carl is a casual Uber driver. He says that the cash is ok, and he gets to meet some fascinating people.
- Build stronger mental and physical health (3)
2. Not Saving Early And Often
When asked what advice they would give to their younger self or a pre-retiree, 69% of retirees said to start saving earlier, and 38% suggested saving more. (4) Every extra dollar you save increases the compound interest you will receive. Moreover, the earlier you start saving, the more time this compound interest has to grow. Super also leverages that with significant tax concessions as well.
So, your employer contributes 9.5% of your regular earnings to your super fund, but that doesn’t mean you shouldn’t contribute yourself. Adding personal funds will help you add to your retirement money. You can contribute up to $25,000 a year and receive a tax deduction for your savings. So topping up your employer’s contribution to the $25k is easy and affordable, and as a reward, you will get a tax deduction for your efforts and a bigger balance in your super fund.
Another way to maximise your super is to do some housekeeping. If you have more than one super account, bringing all of your accounts together (rolling over) makes sense. It reduces fees, makes it easier to check your investments and your retirement strategy, and makes sure that your funds are adequately diversified and your investments are aligned with your long-term plan.
3. Overspending In The First Years Of Retirement
Even if you have a solid gold nest egg to carry you through retirement, it’s important to exercise some financial discipline to make sure your money lasts the distance. It is tempting to dip into your savings as soon as you retire, but this could make or break your long-term retirement dreams.
It helps to make a plan and create a realistic retirement budget, factoring in travel or hobbies, then work with your adviser to find out some smart ways you might stretch your money. We find that most pre-retirees don’t know how much they spend or what they spend their money on, so before retiring, it’s a good time to check your expenses and test out your potential budget. With cash flow apps such as My Prosperity, you and your adviser can run scenarios and see how they stack up. www.myprosperity.com.au
4. Not Having A Retirement Bucket List
Free time is a significant perk of retirement, but transitioning from full-time employment to not working at all, can be a shock to your system. Sometimes just saying goodbye to your career, colleagues, and your routines can cause stress. Planning the activities that will fulfill your time and your interests will help your progress and address the concerns that do come with this life transition.
A recent study on retirement planning revealed that retirees who stayed busy and active, pursued independence, and volunteered their time were satisfied with their life. (5) One survey even found that those who volunteered 200 hours a year (less than 4 hours a week) were less likely to develop high blood pressure. (6) The takeaway here is to be intentional about time in retirement. Making a list of things you want to do, places you want to go, and people you want to spend time with, as well as those people that you don’t want to spend so much time with, is important. Create a roadmap and there is a good chance that your goals will become a reality.
It’s easy to be concerned about losing your identity when you say goodbye to your career, but planning how you will fill your time and venturing out into new territory, or even revisiting old interests, assists in the process of building your own new identity.
Do You Want A Regret-Free Retirement?
Retirement is a journey; one of the longest journeys that you’ll embark on. It should be a time of celebration, not a time of regret. Your retirement will be different to someone else. It’s personal, and yes, you will feel challenged at times.
We frequently talk with our near retirees about the issues as well as many of the options. Importantly, you don’t have to make the hard choices alone. At Echelon, we are here to help you explore, plan and prepare for your ideal retirement.
To learn about how we do this and how we can help you manage your super and your long-term options, we invite you to schedule a complimentary consultation by calling us at 08 9022 7722, emailing firstname.lastname@example.org, or booking an appointment using our online calendar!
Robert Northcoat is the founder of Echelon Wealth Management with over 30 years of industry experience. He specialises in providing advice on self-managed super funds and helping clients build sustainable income streams in retirement. Robert holds a Diploma in Financial Planning from Deakin University, a Graduate Certificate in SMSF from The University of Adelaide, as well as both the Certified Financial Planner (CFP®) and Specialist SMSF Adviser (SSA™). Outside of the office, Robert enjoys watching the Wallabies win, a good wine, and great company. Robert and his wife, Maree, spend their free time travelling to interesting places, sailing, scuba diving, and cycling. Together they have cycled Melbourne-to-Sydney as well as Adelaide-to-Melbourne and participated in several mountain bike challenges. In 2017 they sailed their yacht, Scarlet Ribbon, in the Fremantle-to-Bali yacht race and continued to navigate a passage through Indonesia and Malaysia. Scarlet Ribbon is currently based in Thailand. “It’s not retirement, but it’s a great intro”. To learn more about Robert, connect with him on LinkedIn.