The final years before retirement are some of the most important financial years of your life. The decisions made during this period can affect your income, tax position and lifestyle for decades.
Unfortunately, many people unknowingly make mistakes that can significantly reduce their financial security in retirement.
Here are five of the most common.
1. Moving Everything Into Cash
As retirement approaches, it’s natural to want to protect your savings. Many people move most … or all … of their money into cash or term deposits. While this may feel safe, it can create another risk.
If your investments only earn 3–4% per year and inflation averages around 3%, your money may barely grow.
Over a 20–30 year retirement, inflation can quietly erode your purchasing power. In some cases, being too conservative can increase the risk of running out of money later in life.
2. Claiming the Age Pension Too Late
Some retirees assume they will not qualify for the Age Pension because they have superannuation savings. However, many Australians become eligible for part Age Pension payments once they reach Age Pension age.
Even a small Age Pension entitlement can provide valuable benefits, including:
- Additional income
- Access to concession cards
- Reduced healthcare costs
- Discounts on utilities and services
Understanding how the Age Pension works can significantly improve retirement income.
3. Underestimating How Long Retirement Can Last
Many people retire around age 65. But it’s increasingly common for Australians to live into their late 80s or 90s. This means retirement could last 25 to 30 years or more.
Without careful planning, withdrawals that seem reasonable in the early years can slowly reduce savings faster than expected.
4. Not Having a Clear Retirement Income Plan
Many people focus heavily on building their super balance, but spend little time planning how to draw income from it.
Retirement income planning may involve:
- Structuring superannuation pensions
- Coordinating super with the Age Pension
- Choosing the right investment strategy
- Planning for large expenses such as travel, vehicles or renovations
Without a clear strategy, retirees often withdraw money inefficiently or take on unnecessary tax.
5. Waiting Too Long to Get Advice
Many people only seek advice after they have already retired.
However, the years just before retirement are when financial advice can have the biggest impact.
Important decisions may include:
- When to retire
- How to structure super pensions
- How to maximise Age Pension entitlements
- How to invest retirement savings
- How to make your money last
Getting these decisions right can significantly improve your financial security throughout retirement.
Retirement Is About More Than Just a Number
Many people focus on reaching a specific savings target. But retirement planning is really about creating a sustainable income and lifestyle for the decades ahead.
A well-structured retirement plan can help ensure your savings provide:
- Reliable income
- Flexibility for major life events
- Protection against inflation
- Peace of mind throughout retirement
Are you within five years of retirement?
Now is the ideal time to understand how your savings, super and investments may support your retirement lifestyle.
A personalised retirement plan can help you see how long your money may last and the income it could generate.
Book now at the link below.
General information disclaimer:
This page provides general information only and does not take into account your objectives, financial situation or needs. Consider seeking personal financial advice and/or tax advice before making decisions.
The figures used in this article are examples only and rely on a number of assumptions including investment returns, inflation and retirement spending. Actual outcomes will vary depending on individual circumstances.