5 February 2016

Financial Advice for Soon-to-be Retirees

In The Accumulation Phase Of Your ‘Youth’ (Ahhh Remember Those Days?), The Default Allocation Of Super Assets Typically Works Well For Most Investors.

However, if retirement is looming for you or your current reality, how you manage you money needs to adapt with a more tailored approach that really fits your present lifestyle and financial circumstances.

It goes without saying, older investors don’t have the luxury of time to recover potential losses, with their best earning years receding faster than their hairline.

Here’s 3 things to consider if you’re approaching retirement:

Get clear on the “have-to-haves” and “nice-to-haves”.

Instead of starting with a dollar figure in mind, assess your cash needs by doing a thorough analysis of what you really need to live on the day-to-day to maintain your current lifestyle (or similar). This means determining your average current costs over a month and year, and discerning between what essential expenditure is and what is a bonus or superfluous (be honest).

Once your hit retirement you will need to live on what you have, which must also fund any future, often unanticipated, adhoc spending. The sooner you determine these larger expenses (new car, renovations, holidays etc) the better.

Expect the unexpected.

On that note, it’s always best to adopt the mindset: “life happens”.

By that we mean, realising that your present financial and personal situation is open to change over your retirement years, along with the market conditions, legislation, etc. Just consider the assets test for the Age Pension that was announced in the recent Federal Budget! Current legislation and rules around entitlements can and do change; you can’t be too reliant on these. Expect that these can notably impact your portfolio, and craft financial safety nets.

Moreover, while we all hope to live long and healthy lives, the future is unpredictable, and it’s best to prepare or at least have a game plan for events like illness, divorce, or a market crash. Be clear on any present and future spending trade-offs you are prepared to make if your funds are unexpectedly negatively impacted.

Seek advice from an expert

Being immersed in the industry, a financial expert knows the ins and outs of retirement planning. It’s always best to get the help of a professional when dealing with something as important as your finances, especially once past the accumulation phase, when “setting and forgetting” a broadly diversified investment strategy often leads to reasonable outcomes with little management.

The same cannot be said for retirement. The volume of moving parts around the financial outcomes in retirement makes a solo journey a risky one. An adviser can also help you understand the interaction between Centrelink entitlements, your portfolio, and the repercussions of your financial decisions.

Ultimately your financial planner can develop a plan that responds to your personal situation, and actively manages the day-to-day of your portfolio to the degree you wish. Some like to take a more active role, while others are happy to meet for an annual review to revisit the strategy and adjust it in line with changing circumstances. You can pick the best option with your trusted financial planner.

With a trusted financial professional by your side, you can feel confident you are heading into retirement financially secure. Give us a call or send us an email at info@twd.com.au to chat further about planning for your retirement.