Retirement money mistakes everyone NEEDS to avoid
Your retirement nest egg is the cornerstone of your later years and crucial to protect and grow. There are plenty of traps to fall into – here are a few to avoid.
Lost super and savings – As we move jobs, homes and life stages it’s easy to lose track of super and other finances.Changes to legislation have enabled the government to take control of money held in super, savings, shares and insurance accounts that has been untouched for a certain period of time. While this money is held by the ATO and can be returned with interest, claiming the money back can take time and effort. For this reason, it’s important to ensure your contact details for any financial products you hold are up to date. If you think you may have lost money being held by the ATO, then you should make enquiries with them now.
Over or under insured – Whether it’s private health insurance, home insurance or life insurance, premiums on such policies increase as we age. And while it’s tempting to decide you simply don’t need insurance any longer and cancel premiums, this can come back to hurt you in the longer term. A much more sensible approach is to regularly and systematically review the insurance policies you hold and calculate accurately what level of cover you need, and how much you can afford to spend to get it. There may be some compromises involved, but you’ll be surprised by how much you can save by getting it right.
Out-of-date documentation – Has it been a while since you updated your will? Has your chosen executor fallen out of your life? Do your chosen beneficiaries need updating? While there are other ways you’d prefer to spend you time, ensuring you have the correct documentation in place and that it’s up to date will help your family should something happen to you. A regular review of your estate planning arrangements could save your loved ones a lot of grief.
Underestimating how much money you’ll need – Many people think the age pension will fund their retirement, but for most people it’s simply not enough to live on. Even if people are planning to supplement the pension with their own superannuation, they don’t consider rises in the cost of living, which are usually around three per cent a year, and the rise in other costs such as medical expenses.
Burying your head in the sand – The biggest mistake many people make is to simply ignore the fact that retirement is on the horizon. It’s crucial to make a plan no matter what your age. The first thing to consider is the kind of lifestyle you’d like in retirement, then calculate how much money you’ll need to put away to achieve that, working backwards from there.
Cashing in too early – You can potentially begin to withdraw your super from the age of 55. When people realise this, they often get excited, take out the lot and pay off the last of their mortgage. But there’s one catch – before the age of 60, super withdrawals can potentially be taxed up to 20 per cent. But if you wait until 60 you could potentially take it out and pay no tax.
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