Tip 5: Adjust your asset allocation before retirement
Many growth-based investment portfolios fell by over 40% during the Global Financial Crisis. For those in early retirement or on the cusp of retirement this was a disaster which many never recovered from and it destroyed their retirement dreams.
Most superannuation default investment options are fine for wealth accumulators but not for retirees who should be wealth preservers.
If history repeats itself baby boomer retirees will experience several major market corrections and downturns over the remainder of their lives. Always remember it is not the return on your investments that is most important in retirement, it is the security of your investments.
Plan today for the stormy seas ahead with a well-constructed retirement portfolio.
Tip 4: Put many eggs in many baskets.
There have been many failed income investments where investors have lumped all of their life savings into one institution or investment that has failed. The result has been devastating causing the loss of a retiree’s investment income.
These have often been mortgage backed investments that promised high returns but actually resulted in investors losing a large portion of their investment.
While property is considered safe by many Australians, a rental property with no tenants and owners who rely on that income to provide their retirement income can be left with little or no income and an illiquid investment.
To avoid problems ensure your investment portfolio has liquidity and diversification of income.
Tip 3: Review your estate plan
Everyone of us will die but not everyone has a Will.
A lot of retirees will also need help to manage their finances and health care, however many don’t have a Power of Attorney.
Every retirement plan should include a review of Wills, Powers of Attorney and Superannuation Nominations. Have the circumstances of your beneficiaries changed?
Those beautiful innocent children may now not be such nice adults? Are they in unstable relationships, in at risk occupations or have mental disabilities? Have your Attorneys suffered significant cognitive decline and no longer have the ability to act for you?
Have you considered how much tax your beneficiaries will pay when they receive your superannuation benefit when you die?
Tip 2: Prepare a budget
Create a retirement budget for;
– your active retirement years when you will potentially spend more money travelling and pursuing lifestyle goals,
– your passive retirement years when you are unable to do as much for health reasons or have a genuine desire to slow down so you can “smell the roses”,
– and your frail retirement years where you may have greater health costs and challenges. You may need to consider a move to age care facilities at this time.
Many retirees will outlive their money because they failed to budget for their retirement journey.
Tip 1: Create a bucket list
When you retire immediately start pursuing your bucket list items and actively set new goals.
Often new retirees are worried that they don’t have enough retirement savings and as a result put their retirement dreams on hold. The worry and trauma experienced by new retirees results in a life of worry and depression. This worry causes deterioration in health and when they start to spend their travel dollars, they find they have left it too late and can’t get travel insurance.
Your retirement objectives should include creating a sense of purpose and for some this could be volunteering or it may be caring for others for there is an old saying that it is in giving that we receive. This will also combat the loneliness that is experienced by many of the third of older Australians that live alone.
When you are elderly you want to look back with contentment at the wonderful retirement journey you have had, not with regrets about what you didn’t do.
Remember the only impossible journey is the one you never begin.
