Australians are now living longer than ever, and thanks to the rising cost of living and property, continuing to live the lifestyle you’ve become accustomed to well into your retirement years means getting prepared early. Retirement is a concept that seems too far into the future for any of us to worry about right now, however being conscious of your future now will set you up for success when that time finally rolls around. However, there are several mistakes that Australians are making when they prepare for retirement. Here’s what they are, and how you can fix them.
Gemma Dale, NAB finance specialist, offers her tips on how to plan and save smart. Gemma says there are a number of challenges Australians face when preparing for retirement – yet getting a few things right along the way will help them achieve and maintain the lifestyle they want.
Communicate with your spouse
“We often forget how important it is to discuss retirement goals with our spouse. Retirement can have a huge impact on the dynamics of a marriage or partnership; it’s a new phase of life that requires adjustments from both sides,” says Gemma.
“Retirement can cause friction in a relationship, particularly if one spouse is ready to retire before the other. I suggest communicating early. that way you can work towards a common goal; for example, would you go part time rather than both retire at the same time? It sometimes takes a lot of planning to get it right, but it will help you achieve the lifestyle you both want.”
Rethink when you plan to retire
“A lot of the time there is a catalyst for retiring – whether it’s health related or redundancy – so it’s worth preparing for retirement earlier than you think. That way if something unexpected happens, you’re ready to retire early and can maintain the lifestyle you want. Being adaptable and planning a ‘nest egg’ for the inventible unpredictability of life is key.”
Letting family impact your retirement
“Parents often take on the responsibility of looking after their children and elders, meanwhile their finances end up suffering. When taking care of elderly parents on a full-time basis, it’s important you can provide financial compensation for yourself,” says Gemma.
“One option is to ask for support from siblings or other family members to share the responsibility. This will ensure you can continue working and putting money aside to take care of yourself later in life.”
Borrowing later in life
“A challenge for Australians nearing retirement is borrowing close to their retirement and still having substantial debt to pay off. Retiring debt free should be your first goal, followed by boosting your superannuation.”
“It’s fairly common for Aussies to borrow close to their retirement, then use their super to pay off debt. This is often the case when children have flown the nest, but parents still live in the expensive family home. Although we all love to play host to our family, it can massively comprise standard of living and impact your retirement fund. One way to combat this is to downsize as early as possible and put the funds into your retirement, will help you live much more comfortably.”
Loaning money to your children
We often feel an expectation as parents to provide for our children (aka the bank of mum and dad). Unfortunately, it’s not always possible for parents to retire comfortably and provide a huge level of financial support to their children. Loaning more than you can afford (to your children or others) can weaken your financial situation as you near retirement, so I’d suggest not doing it unless you can afford to. If you do plan to loan your children money, consider saving a separate pot in case they can’t repay the borrowed amount.”
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