Retire with confidence – overcoming your retirement fears

November 29th 2023 | Categories: Retirement |

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With proper planning, retirement can be the gift of some of the greatest years of your life still to come. Retirement is a lifetime in the making, it should be a time to have the confidence to do what you want when you want. After all, you’re retiring from full-time work, not retiring from life. 

The reality for many is, after decades of hard work focusing on career, family, buying a home or all the above – there’s a sense of urgency to ‘catch up’ and meet an ill-defined retirement goal. Put simply, a retirement fund (most likely, your super) isn’t considered a priority. Until it is.   

At Invest Blue, we work closely with you to support and help define your ideal retirement, demonstrate what is possible and develop the right advice to empower you to live your best possible life.   Let’s break down the wall of worries that retirees and pre-retirees often face.   

When FORO replaces FOMO

The most common fear of retirees is running out of money. After a lifetime of working and receiving a near-stable stream of income, the prospect of funding an enjoyable retirement from a single, soon-to-dwindle pile of money proves a mental challenge and emotional rollercoaster. With added threats of an active mortgage, or the growing cost of living still ticking away at your lifetime savings. It’s no wonder that close to 50% of Australians are concerned they don’t have enough money for retirement.  International retirement income specialist, Don Ezra, points to two sources of worry when providing for life after full-time work:

“One is that you don’t know how long you’ll live. The other is that you don’t know how large a return your financial capital will earn.” 

Complexity and variables

In Australia, we have a complex retirement system which seemingly increases in confusion with every election cycle. In addition to regulatory, longevity and return risk, retirees need to manage the unique set of variables that can impact their situation.  For example, some retirees are thrown into retirement by illness or injury. Others have retirement strategies complicated by divorce and re-partnering.  And, like anything, the duration of retirement is itself an unknown. 

 Explore our Knowledge Centre below for more insights.

The ‘bank’ of mum and dad

For many retirees, there’s a valid cause for concern about the ability of their child’s (and their child’s child) generation to enter the property market. Decisions about the right level of retirement spending are complicated by the desire to leave a home (or at least a deposit) to their children. This can complicate the work of financial advisers, and policymakers often question why savings are used to benefit the next generation, rather than underpin retirement lifestyles. 

Trouble at home

Reverse mortgage schemes like the government’s Home Equity Access Scheme are gaining popularity and provide a significant increase in age pension income. Yet many retirees will remain ‘asset rich and cash poor’ until they can monetise the capital sunk into their home without the risk, costs and potential bequest-reduction inherent in a debt-driven home-equity solution.    

Price pressures

In the current economic climate, inflation is intensifying all the challenges we’ve discussed so far. Inflation poses a much bigger issue for retirees. During your working years, your salary, super contributions, and investment income all typically rise with inflation.  In retirement, however, that protection is lost and by compounding over time, inflation represents a real threat to a retirement lifestyle. This threat was made clear with the recent increase in the amount needed to enjoy ASFA’s ‘comfortable retirement standard’. In March 2023, it hit a record high of $70,482 per year for couples. That’s up 7.7% for the year.   

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Finding a solution

It’s up to financial institutions, advisers and policymakers to help pre-retirees, retirees and their families manage these challenges.  Ultimately, we need to help you build a large enough nest egg so you can balance your retirement lifestyle with any sense of obligation to your family. After all, retirement should mean giving up work, not giving up your lifestyle.  This goal takes education, strategic advice and clear communication. It also takes innovative retirement income products. We’re here to help. 

Remember, a goal without a plan is just a wish.  Book in a retirement review.

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What you need to knowThis information is provided by Invest Blue Pty Ltd. (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice regarding those matters and seek personal financial, tax and/or legal advice before acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.