There are a number of landmines in preparing for retirement that have the potential to derail your plans. Knowing some of the things you need to look out for in retirement can help you avoid them!
Having a longer retirement than you expect
Do you have a strong family history of people living into their 90s or beyond? Do you make your health and wellbeing a top focus? These kinds of considerations could mean, statistically, you could live beyond the average life expectancy. Projectors and calculators use averages and assumptions to come up with what you might need in retirement. You may have calculated your retirement balance based on living until the average age, when you could live much longer.
Of course, nobody can know how long they will live. However, considering that you might live longer than average is something to think about. Do you need to adjust your plans accordingly?
Check your details using our online calculator – it’s easy to see how long your money could last.
Not understanding the way an Income Stream works
When you retire, your super money is yours to do with as you please (if you have met a “condition of release”). But it can be hard to know what the best thing to do with it is for you. There are so many options out there!
With that knowledge, you can make an informed decision about what you will do with your super balance.
Not understanding your Services Australia options (Centrelink)
There are many factors that involve Services Australia (formerly known as Centrelink) which you need to be aware of, well before you retire.
For example, if your spouse is younger than you, you may be able to use a “Recontribution Strategy” to move some of your super to them and increase your eligibility for the Aged Pension until they also reach eligibility age.
Also, Services Australia include gifts you’ve made in the past 5 years in your Aged Pension income and assets tests. It means that if you are planning to gift money in the lead up to retirement, you need to keep in mind that these amounts will still be included in your income and assets test.
Services Australia have Financial Information Services Officers on staff to help you understand all of your options and the things you need to consider, even in the years before retirement.
Staying in the default investment option
Staying in the default investment option might not be a true “landmine” – in fact, the default option might suit you perfectly – but if the default option isn’t right for you, you could be taking more risk than you’re comfortable with or you could be losing out on returns that you could otherwise be earning.
Find the Risk Profiler in the online member portal to check you’re in the right option for you. Read more about the different investment options to learn what they offer and what their risk level is.
Making an informed decision about your investment option now and at retirement can help you sleep well at night.
Forgetting to plan what happens with your super after you die
You may have a will in place, but you need to also consider what happens with your super (or Income Stream pension). Your super won’t necessarily automatically included as an asset to be distributed under your instructions in your will.
As part of your estate planning, think about how tax will be applied to the pay out of your Income Stream when you die. For example, if you want to leave your Income Stream balance to your adult children, they will be taxed on the amount. However, you may be able to take advantage of a “Recontribution Strategy”, moving money to a tax-free status, leaving them with more money after you die. Alternatively, if you want your spouse to continue to receive regular Income Stream Pension payments, nominate them as your Reversionary Beneficiary.
It’s important to get all the relevant information
Read about nominating a beneficiary and watch our videos about Recontribution and Leaving your super to your adult children or other non-tax dependants.
Undervaluing or overvaluing your assets
You might think that your home, investment properties or other assets will help support your lifestyle in retirement. And a well-planned portfolio can do that. But you need to be realistic about what these things are worth and what they will deliver you in retirement.
If you value what you own incorrectly, you could find yourself with less money in your pocket than you expected. Or you could have assets or cash above what you expected, which could impact your Services Australia (Centrelink) eligibility. Or it could leave you with capital gains to deal with.
It could also impact on your living situation if you under or overvalue your home when you go to downsize to a new home.
Make sure you have a realistic valuation of your assets and of ongoing costs or what the costs could be at the time of selling them.
Not making plans
Having professional help guide you as you plan for your retirement can be very reassuring.
A financial planner who you trust and work well with can help explain your options. They can clear up how different choices can impact on your situation now and into the future.
Your financial planner could help you with one specialised area or provide you with a comprehensive plan covering everything. So, you can employ a financial planner to help you with a single issue, such as investing an inheritance. Or employ a financial planner to work through everything you’ve got including property, shares, estate planning, family trusts and more.
The cost of employing a financial planner could potentially be taken out of your super. Speak to us about whether this option could be something you could take advantage of.
Assuming you can’t learn any more about your own situation
Our Member Services Team can help you get a better grasp on your own situation.
This is true, whether you feel like you already have a good understanding or whether you feel like it’s all a mystery and don’t even know where to begin.
Meeting with our Member Services Team is free for our members. Meet at our Adelaide CBD office, at your worksite (including regional trips which are scheduled through the year), at another location that suits you, over the phone or by videoconferencing.
If you have questions, bring them with you. Your spouse is welcome to come along too to hear the information with you.