Common mistakes of retirees

A retired client opted to take the advice of their family over mine.  Apart from the small dent to my ego this also got me thinking about some of the common mistake retirees make day-to-day.

All too often people head into retirement basing important decisions on the opinions of those closest to them rather than the advice of an expert.

There is little doubt that this advice is given with the very best of intentions, however it cannot replace the advice of a financial expert.

The decisions you make around the structuring of your retirement nest egg and the investment of that nest egg are critical. By all means seek counsel from those closest to you, but do your own research and get advice from someone independent and with relevant expertise.  Ensure you connect with the person you choose to provide you with advice.

Another common error made is over-reacting to market volatility and the hoarding of cash in low-interest-bearing accounts.

Whilst this might be a natural reaction and may make us feel safe by avoiding the ups and downs of the markets, it can have a huge impact on your retirement lifestyle over time.

Don’t underestimate the importance of growth – if your money isn’t growing in value it is probably not keeping pace with inflation, meaning that, over time, it is losing its purchasing power.

Make sure your portfolio has the ability to grow.  This will give you the best chance to ensure the income it generates remains sufficient to meet your living costs.

Many of us are placed into a default superannuation option at some point during our working lives and too many of us remain there.

Many retirees do not review this mix of investments regularly either through laziness, a lack of advice or a lack of interest.

Having an appropriate asset allocation in place allows you to balance your income needs with the amount of growth required to keep pace with inflation.

Not adjusting the amount of risk you take as you get closer to retirement is another common mistake.

As you get older, we traditionally try to ensure your asset allocation gets safer, that is less in growth assets such as shares and more in safer assets such as term deposits and bonds.

With the wonders of modern medicine, Australians are now living longer than ever. which means you will need more capital in retirement to ensure it lasts as long as you do.

Underestimating how long we will live and taking too much out of your retirement savings too early is another common mistake made by retirees.

It is understandable that, when initially retired, you will want to take that dream holiday or upgrade your car, and these types of things need to be taken into account when working out how much you need in retirement and how much you can afford to spend.

Taking too much out of your retirement nest egg in the early years of retirement can leave you short later in life.

Get a good financial plan in place and review it regularly, make sure you have a budget and review this also.

A good plan creates and protects your wealth and should provide you with peace of mind.


Knight Financial Advisors Pty Ltd is a Corporate Authorised Representative of Sentry Wealth Management Pty Ltd (AFSL 227 748) ABN 77 103 642 888. The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.

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