Rating your financial performance:
But the game’s far from over
The March Retirement Essentials Retirement Pulse has once again provided us with many useful insights into your thoughts on maximising retirement income.
One question in particular:
If there was one thing that you wish you had done to maximise your retirement savings, what is it?
demonstrated that, when it comes to funding a retirement, there are many, many ways to skin the cat!
Apart from the diversity of answers, however, there were also some recurring themes.
Read on to see the main ways in which retirees feel they have let themselves down – and whether it is too late to correct these actions.
Super was viewed as the main disappointment for many of our respondents. When it came to what could have been better managed, most respondents either felt they had not contributed enough, they should have contributed earlier or they could have used strategies such as salary sacrifice to better effect.
Is it too late?
Accruing super is only one half of the retirement funding story. Managing it well after Preservation Age is equally important. And there are many more strategies that can be utilised to ensure that you maximise this precious retirement nest egg. These include downsizer contributions, younger spouse rules, bring forward rules and many other ways to combine super and government entitlements.
Nearly as many respondents wished they had known ‘what they didn’t know’ when it came to saving, contributing and drawing down retirement funds. A lot wished they had sought advice earlier, better understood the value of contributions, started planning for retirement earlier and been more thoroughly versed in the many ways to save and benefit from things such as compound interest.
Is it too late?
When it comes to learning more about ways to manage your money, it is NEVER too late. There are so many sources of reliable information (including sites such as Moneysmart) and enewsletters such as Retirement Essentials which offers retirement income explanations and updates on a weekly basis. For more urgent or specific financial advice needs, a tailored consultation is a really useful way to check that your understanding of entitlements or super rules is both sufficient and correct.
This was also a cause of regret. Clearly not everyone may have been able to save more for their later years, but many respondents felt that they could have cut back on lifestyle spending for a better outcome when they retired.
Is it too late?
Not necessarily. Some people manage to live within an agreed budget and they are to be applauded. This is a great achievement. Many others do not know how much they spend and this can be quite stressful. More to the point, it’s impossible to save if you don’t know where your money goes. There are so many useful tools associated with bank accounts, that the hard work calculating monthly expenditure, by category, can be done for you. Alternatively, the ‘old school’ system of keeping one month’s receipts and then doing the maths yourself still works well. Whichever is your preference, it is never too late to gain an accurate idea of your outgoings and to cut discretionary spending if you feel you are overdoing the treats.
Wiser investment decisions
There were many different takes on this strategy. Some respondents felt that they had pursued low risk cash investments at the expense of growth. Others felt that investing in property might have served them better. Still others rued the decision not to invest in the share market. And some felt that they had eroded future income by giving too much to family.
Is it too late?
This depends a lot on the opportunities you believe to be lost. It’s never too late to change tack with investments, but it is unrealistic to believe you can recover spilt milk in every case. Reviewing your asset mix is an excellent starting point. Which asset classes are you currently holding? Do they match your appetite for risk? Are you hanging on to habits you wish you had dropped? For instance, in the same March Retirement Pulse, barely 3% of respondents thought savings in cash deposits were the best way to save, but nearly 20% say this is what they have actually done. This is not to say that it is a bad decision to have money in cash – on the contrary most advisers suggest ‘rainy day money’ is really important. But is it time to question the degree to which you keep money in cash deposits?
Paying off the mortgage
There were also respondents who felt that paying off their mortgage faster would have helped them along the way. This makes sense and can be a really useful strategy when combined with super drawdowns and Age Pension applications.
Is it too late?
No, it is never too late to consider your mix of private savings or investments, superannuation and outstanding debt. There will always be pros and cons to paying down debt, as you can lose flexibility should you need extra cash. But as interest rates increase, debt reduction could be, on the whole, a great way to boost retirement income.
As we noted at the beginning of the article, the game is far from over.
Saving for retirement is the first half of the conversation. It’s how you manage the other half that can really make a difference. Tailored financial advice consultations are very useful if you would like to revisit some of your decisions regarding superannuation, saving, investments, mortgage management or to increase your financial literacy in any of these areas.
Retirement Essentials offers the opportunity to talk through these issues or provide would another set of eyes on your finances and goals.
These advice consultations provide general information that can help you to plan your retirement finances.
Or you might have some more specific questions that you want help with to determine how an alternative strategy could affect your financial position and your ability to achieve your goals. We offer our financial adviser-led strategy consultations on a range of topics. You are able to join one of our experienced advisers online where they assess your current situation and show you what an alternative option may look like. The links below will allow you to book your specific strategy consultation:
- Retirement Forecasting (understanding spending options during your retirement journey).
- Understanding more about super (there are many options available to maximise income or wellbeing).
- Maximising your entitlements (making the most of your financial resources and Centrelink)
- Understand impacts of your home mortgage (consider your retirement journey options)