Five steps to peace of mind

The final report of the Retirement Income Review ( July 2020) found that 28% of early retirees are in financial stress. This report was tabled two years ago, before interest rates and the Consumer Price Index began to increase so rapidly. It is highly likely that there are now more retirees feeling stressed, in particular those who are renting and those with a mortgage who are now facing much steeper interest repayments.

As with all life’s big challenges, there are some things you can control and some you can’t.

Let’s start with the latter. Most of us have little control over the price of fuel, mortgage interest rates and hikes in food and grocery prices. These factors are external.

What we can control, however, is how we respond to these challenges.

Here’s a five-point plan to help you to understand the options that you do have when it comes to managing your financial stress.

Know what you have, right now

It is surprising how stressed we can feel watching the nightly news. At the end of the news segment we usually see a financial market report, often featuring alarming graphs showing volatile movements in key benchmarks. But this is really just a fanning of the flames on a daily basis – an attempt to get eyeballs, by using daily data as opposed to long term statistics. What matters most requires much longer vision and understanding. Your first step is to know your current assets and liabilities. How much do you have (home, investments, super, cash, other), less how much you owe (mortgage, personal loans, credit card debt etc). This is the real number that matters most and it is important to keep on top of this current worth. If you review this every, say, three months, you may be surprised to see that your net assets are actually increasing over time. If they are not, then at least you know where you sit, and whether there is an issue that you really do need to address.

Face your debt

A major cause of financial stress is the concern that our debt is too high. Many people suffer this stress, but don’t actually itemise the debt and consider ways to handle it. So the first question is how much debt are you carrying? And then, what is your debt to asset ratio? Across the population, this sits at 16.4%, according to IBISWorld, but many of these households are at peak earning power and have many more years in which to pay down debt. Retirement debt is a whole different scenario. In our main article this week we look at ways of handling debt in retirement and offer specific suggestion for those who believe that their debt to asset ratio is uncomfortably high.

Check your spending

The next step in tackling financial stress is to know how much you spend. Yes, this may seem obvious, but it is surprising how few people know exactly how much they spend. And it’s impossible to cut back if you don’t know the total. There are many excellent online budgeting tools and calculators available for free. Taking an hour or two to review your outgoings may help you identify some quick wins in terms of reducing your spending. Research tells us that those who know they are living within their means are the most financially comfortable, regardless of their actual income. Becoming such a capable money manager is the quickest way to reduce financial stress. The Moneysmart website is a great starting point with a downloadable spreadsheet where all the sums are automatically done for you once you input your expenditure.

Check your money will last

As Nicole, our very popular financial adviser, has noted, you are unlikely to run out of money without warning. There’s a reason for this. Most people are far better funded for the long haul of their retirement than they realise. They are unaware of this good news, as many have not sought advice  to properly  project their long term retirement income. Such an income projection requires complex sums involving expected superannuation gains, investment returns, inflation and if and when an Age Pension will kick in.  Our advisers can take you through our Retirement Spending Forecasting tool to help to determine how long your savings will last. And if you don’t like the answer, our advisers can assist you to revise and rework the sums until you reach a more satisfactory outcome.

Seek affordable advice

National Seniors Association (NSA) research from 2019 shows that those who have received advice are less likely to worry about the longevity of their retirement income.

Financial advice has suffered from bad press over the past few years, for good reasons. But now that recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry are flowing through, the financial services industry has had to reform its practices. The growth of ‘fintech’ (financial technology tools) has allowed many advisers to use calculators in consultation with clients to reduce financial planning time and fees. Retirement Essentials can offer the best of both worlds – the use of fintech in the form of our Age Pension Entitlement Calculator and our Retirement Spending Guide, used by our advisers in tailored consultations to discuss your retirement income needs. This advice is affordable and targeted to address your most pressing concerns.


Discover what you can really afford


This article is provided by Retirement Essentials Representative Number: 001260855.  We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859.  This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.