Are you a gambler with your money

The race that stops a nation takes off at 3pm on the first Tuesday of November. There’s thrills, spills, fancy headgear and this year gentlemen may even wear shorts! By 3.15 pm we’ll all know the winner and the bookies will be even richer.

Most of us love being in a sweep or having  a ‘flutter’ on this race. And many of us who have no clue about horses or their form will choose our winner based upon the colour of the jockey’s silks or the number closest to our birthdate. 

It’s a bit of fun for the vast majority who don’t take it all too seriously or wager too much.

So you may not see yourself as a gambler. But are there other, higher stakes ways in which you are gambling?

Just as there is a great deal of science, experience and long-held knowledge in the horse racing industry, so there is a huge body of knowledge associated with making and managing money. Added to that knowledge is a continual need to understand all legislation and interpretations of the rules. This complexity is the thing that drives most retirement ‘punters’ crazy. 

How do most people respond?

There are three main ways in which most of us respond when faced with the need to make decisions about important things we’re unsure of such as medical matters, finance or legal issues. Human nature being what it is, most of us will choose one of three responses. We will either:

  • retreat into denial
  • self educate, or
  • ask a professional.

Whilst the last two strategies make sense, the first one is often more common. Overwhelmed by the need to make a decision about something complex, about which we know very little, our natural instinct is often to retreat. That’s understandable. But that means taking a massive risk, in effect gambling on the fact that doing nothing will buy you time without anything detrimental happening.

This doesn’t work when it comes to entitlements. Eligibility is a clear cut situation where knowing the rules and how they apply in your own particular situation is really important. We recently reported on Geoff’s lack of urgency when it came to applying for an Age Pension – he had (conservatively) foregone $75,000 of income over a few years because he hadn’t ‘got around to it’. Retirement Essentials director, Jeremy Duffield tells us that fewer than half retirees (44%) apply for an Age Pension on time. Across the Australian population this is a frighteningly high number of unpaid entitlements.

A useful tip from our Customer Services Team is that you can apply for the Age Pension as much as 13 weeks before you turn 67. This means, if eligible, you’ll receive payments from day one. Those who wait until they reach Age Pension age and they start to think about gathering the documentation and filling in the forms can be losing income for weeks. Remember, if you are successful, Centrelink only backpays to the date the application was filed. So there is no back pay for those who are ‘getting around to it’.

The same situation applies when seeking a Commonwealth Seniors Health Card. This card is now available to the vast majority of self-funded retirees. Yet many do not know of its existence. And many more are still ‘getting around to it’ as it seems complex. It’s not, and those who don’t wish to deal with Centrelink themselves can access support through the Retirement Essentials Concierge Service.

DIY retirement income 

Older Australians who decide to educate themselves on retirement-relevant aspects of financial planning are wise. Knowledge is power and understanding the rules and the way that they are interpreted is one of the best things you can do to help yourself. This is one of the reasons that Retirement Essentials sends weekly enewsletters to all our members. Sharing plain English updates on super, the Age Pension and retirement income options allows our members to remain engaged and informed. 

Will your money last?

Knowing how long your money will last is the best way to ensure that you are not gambling with your retirement future. This knowledge sets you up for success with information that allows you to see your likely super drawdowns, Age Pension payments and other forms of income across the years. It is then so much easier to create a budget to suit these forecasts and stop stressing over the ‘affordability’ of your retirement.

Advice consultations offered by Retirement Essentials are affordable, accessible and friendly meetings where an experienced adviser is able to answer your most pressing questions, which do usually start with ‘Will my money last as long as I will?’.

Some members have other specific questions about mortgage repayment, downsizing contributions, lump sum payments and the complicated mix of Account-Based Pension with Age Pension benefits. But they are often underpinned with the same concern. For this reason we have noticed a spike in bookings for the Retirement Forecaster consultations where, based upon your assets and expected income, you can  view real time projections as your spending, earning and entitlements change over time.

What about you?

How do you approach your income management?
Are you a DIY self-educated manager?
Or do you find seeking support from professionals is the quickest or safest course of action?
Is anyone prepared to admit to being a procrastinator?