Retirement money mistake Number 5 can sometimes cost you the most. This happens when you don’t know what you don’t know and make decisions based on a poor understanding of the rules.
Remember the excitement of turning 21? The best part of becoming an adult was the fact you could now set your own rules. And that, of course, meant the fun of getting things right – and wrong.
But as much as we’d like to think, as older adults, that we call the shots, there are external rules that dictate much of what we can and can’t do.
Obvious current examples are health and travel rules and regulations.
And when it comes to money, it’s the government and regulatory bodies who really call the shots. And unless you are across these frequently changing, often perplexing rules, there is a very real risk that you could endanger your precious retirement nest egg.
Take Susan and Geoff’s decision to downsize as an example.
The sale of the family home and purchase of a smaller apartment in another suburb was both an emotional and financial drain. They had wanted to free up money from their previous home in order to fund a more comfortable lifestyle. But the work involved in the sale, the real estate agency costs, moving expenses, new body corporate fees and tax ate up most of the profit they had planned to live on (as a supplement to their account based pension). Susan doesn’t like the new neighbourhood as much as the old one, and there is precious little play space when grandchildren come to visit.
Sadly the move was not necessarily the best option for this couple. As Susan is on a carer’s payment, they could have qualified for the Pension Loans Scheme, which would have freed up capital, paid as a fortnightly amount, and allowed them to stay where they had lived happily for more than 30 years. The loans scheme was introduced in 1985 but revamped in 2019. It is below the radar for a lot of retirees. Susan and Geoff had heard about it but assumed they wouldn’t qualify.
Assumptions are often gateways to mistakes. And this is why a thorough knowledge of the rules is so important.
Some decisions in retirement are bigger than others. These include moving home, helping family financially, paying off mortgages and lump sum decisions. There are many Centrelink rules which might apply. But there are also rules relating to tax, superannuation, and estate planning that may affect rules for those who are self-funded. These rules can have a direct effect on your financial and emotional wellbeing. Few people are across all the rules, but experienced advisers can draw your attention to pitfalls, and refer you to other professionals with specific expertise as needed.
Don’t risk finding out the rules after it’s too late to change your decision.