Superannuation is essential to retirement planning in Australia. It is a mandatory, long-term saving and…
Some typical financial mistakes people make include not knowing how much money they will need in retirement, not having a plan for their retirement income, and not keeping track of their expenses. Other mistakes include:
- Not shopping around for the best financial products for their goals.
- Not reviewing their investments regularly.
- Not taking advantage of government benefits and concessions.
Making even just one of these mistakes can significantly impact your retirement income and quality of life. So it’s essential to be aware of them and take steps and take appropriate action.
Continue reading as we delve deeper into the common financial mistakes you should watch out for.
Financial Mistakes That Can Affect Your Retirement
1) Retiring Early
People often retire early without thinking about how they will live after they retire. They may have enough money to cover their basic needs, but they don’t have a plan for their long-term retirement income. This can lead to financial problems down the road.
The most straightforward way to avoid retiring too early is to obviously work for longer; you can even choose to compromise by gradually reducing your hours so you can enjoy the best of both worlds. This has two advantages: it gives you more time to save money and delays the point at which you start withdrawing funds and eating into your savings.
Postponing retirement is a growing trend, in 2018, Australians aged 65 and over had a workforce participation rate of 13 per cent, compared with eight per cent in 2006.1
2) Not Topping Up Your Superannuation
Superannuation is a retirement savings vehicle that most Australians use to build their retirement nest egg. Your employer is legally required to make contributions to your superannuation, but you can also make voluntary contributions.
Making voluntary contributions to your superannuation is a great way to boost your retirement savings. The earlier you start contributing, the more time your money has to grow. For example, if you start making contributions at age 25, your money will have 40 years to grow before you retire at age 65.
3) Being Conservative With Investments
Investing is a great way to grow your money over time. However, many people can be too conservative with their investments and miss out on potential earnings.
The stock market can be volatile, so it’s important to make smart investment decisions and diversify your portfolio to reduce your risk (see point #4). However, if you are too conservative with your investments, you could end up missing out on potential earnings or have your savings eroded by inflation.
It may be best to meet with a qualified financial adviser who can help you develop an investment portfolio that suits your risk appetite while also helping you to achieve your goals.
4) Not Diversifying Your Investments
Diversification is a crucial investment strategy that can help you reduce risk and improve returns. When you diversify your investments, you spread your money across different asset classes, such as stocks, bonds and cash, as well as different options within an asset class.
Diversification is significant for retirement savings because it can help you weather market downturns. For example, if the share market crashes, you may lose money if all of your retirement savings are invested in shares. However, if you have a diversified portfolio, you may be able to offset some of your losses with gains in other asset classes.
5) Not Reviewing Your Will
A will is a legal document that outlines how you want your property and possessions to be distributed after you die. If you don’t have a choice, your property will be distributed according to your state’s intestacy laws.
You should review your will regularly to ensure it still reflects your wishes. You may need to change if you get married, have children, or experience other life changes.
Make Smart Decisions for Your Retirement
You can avoid common financial mistakes by preparing for your future. Creating a budget, building a retirement nest egg and regularly reviewing your progress are all critical steps. You should also protect your finances by buying insurance, investing wisely and reviewing your will.
When making financial decisions, you can talk to Coastal Advice Group. We have offices located in Newcastle, the Central Coast, Sydney, Port Macquarie, and Byron Bay. Call us or book online to secure your complimentary first appointment with us today and get started!
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.