The Retirement Essentials team had a lively discussion this week about the most important elements of successful retirement income planning.
And we all seemed to agree on something that is rarely discussed, but very powerful when it comes to making the most successful decisions about building a sustainable income steam. That is the fact that you are the most influential part of the equation, and your good decisions are most likely to affect how long your money will last.
How can this be, you may wonder, when wildcard events like the Global Financial Crises or pandemics can hit with little warning – and cause violent fluctuations in the markets, severely reducing the value of your savings seemingly overnight.
If you have money to invest, for instance in super or a managed fund, there are three main factors that need to combine to achieve your eventual retirement income. There is also something called behavioural economics.
First up, the three factors needed to build a nest egg are:
- Checking that the fund your are with isn’t charging exorbitant fees, so your savings aren’t diluted
- Selection of the investment option that best meets your goals and risk tolerance
- The decisions you make as you navigate the pillars of your retirement; super withdrawal, pension eligibility, asset management, debt management and any decumulation of private assets
Behavioural economics can help us understand that many people struggle with decision making for a variety of reasons. The famous psychological test which asked children if they wanted the ice-cream now or later reveals that some of us like instant gratification and others are prepared to go without now, to get rewards later. In the world of retirement savings, this might mean redirecting a salary increase to higher mortgage repayments so you start retirement with a low or no home loan.
But gratification isn’t the only behavioural issue at play. Many people are disengaged because they are overwhelmed by the rules and complexity. Others may feel there is little point in spending too much time on retirement income management as they ‘have so little it is not worth worrying about it’. It’s understandable how people can feel disheartened, but it is normally the case that the less you have, the more important it is to maximise every last penny.
Our job at Retirement Essentials is to provide objective and useful information to help you make your own best decisions – and to provide affordable support if a qualified professional is needed.
Sometimes, in fact, your best decision is to acknowledge that you don’t know what you don’t know and to seek further information or advice before acting. Such advice may be obtainable from a trusted accountant or a financial professional. ,
There is a myriad of aspects to financial decision-making and it’s only human to feel confused or anxious when we are faced with competing demands.
But there are also useful ways to pause and prioritise those decisions that will work best now – and those that can be managed along the way.
The team at Retirement Essentials is here to help.
First up, with Centrelink entitlements. If you don’t know how much you might get, you are missing a vital piece of information.
So far we have delivered over $8 million worth of pension benefits on behalf of our members, so ensuring that you keep up to date with your pension and other entitlements is very worthwhile.
The second way we can help is to offer affordable advice, which allows you to share the decisions that are concerning you the most with an experienced and trusted professional who can help you to decide your most appropriate plan of attack.
And lastly, we are currently helping thousands of self-funded retirees to access the Commonwealth Seniors Health Card (CSHC). This is a highly valuable concession card for those who do not qualify for the Age Pension but will benefit from the many discounts flowing from this card, including rates, medical services, medication and more.