The information in ‘Retirement Debunked!: 8 Common Retirement Misconceptions’ has been adapted from an article by our dear friend and Founder of The Retirement Lifestyle Center, Barry LaValley. Barry is a leading educator and authority in the retirement space in North America, who we have had the privilege of working with closely (and over Zoom in the last few years – thanks pandemic!) over the years. Barry works with individuals, organisations, employers and associations to help them understand and plan for their retirement life. To learn more about Barry and his work, head to: retirementlifestyle.com/barry-lavalley.
As strategic financial advisers, we spend a lot of time working with our clients to prepare them for retirement.
Throughout our many years of working with pre-retirees, we’ve found that, whilst they are often clear on what they are retiring from, they are often not so clear on what they are retiring to.
We believe that smart preparation goes beyond just the financial elements, and also includes careful consideration of the important life issues that will affect them during this phase of their life.
Whether it’s health, family, relationships, finding purpose or pursuing passions – all of these things can and will have a tremendous impact on your retirement journey.
We’ve gathered 8 common retirement misconceptions we hear often, and we’re here to debunk them!
1. “You can and should retire at 65 in Australia.”
Whilst 65 has historically been the age for receiving the Age Pension, the current pension age has actually increased to 67 for those born after 1 January 1957.
Even with this increase however, many Australians are still choosing to work (in some capacity) past this ‘traditional’ retirement age. This can look like full-time, part-time or casual work.
One may believe that this is attributed to the fear of “running out of money”. But while some retirees do work to help subsidise their cash flow needs, others understand that work (in any capacity) brings purpose and structure to their lives, as well as much needed social interaction and physical health and wellbeing.
Many retirees even opt for unpaid volunteer work to make use of their increased free time. Retirement can be a great time to pursue passions that you were otherwise unable to during working years, whether due to time or money constraints.
2. “Only the super wealthy can afford to retire.”
It’s a common misconception that only the super rich can afford to retire or that you need a certain level of investment assets to be ‘comfortable’ in retirement.
But how do you define the ‘perfect’ amount to retire on? You can’t! Because the fact is, what constitutes a ‘comfortable retirement’ will be specific to you and your wants and needs.
The golden question is: What do YOU want your retirement to look and feel like?
Your unique wants and needs will differ greatly from that of the next person. But knowing and understanding your answer will allow you to make strategic and thought out financial decisions, so the next stage of your life is not just suitable, but enjoyable.
With strategic financial planning, everyday Australians are able to retire very comfortably through their superannuation, personal investments, the Age Pension, or a combination of all of the above, no matter what your nest egg looks like.
3. “Superannuation guarantees a comfortable retirement.”
It’s no secret that Superannuation is an essential part of retirement planning. But super balances can vary greatly depending on investment performance, costs, and contribution amounts. Nothing is ever guaranteed.
It will be highly beneficial to engage with a financial advisor to ensure you’re making your super and investments work for you and your retirement, not against you.
While it may seem unnecessary, it’s never too early to begin retirement planning, even in working years, to ensure you get the best out of your financial decisions for the next stage of your life.
4. “The Government supports all Australian retirees with the Age Pension.”
While the government does provide the Age Pension and other forms of support, the Pension is means-tested. This means that not ALL retirees are eligible or will even receive the same entitlements as the next person.
While tempting, it’s important that you aren’t putting all of your eggs into one basket for your retirement strategy. Even if you do think something is a “sure thing”, diversification is key, and relying on one single income source (like the Age Pension) can be a retirement recipe for disaster.
It’s essential that you are making strategic and well-informed decisions for retirement planning, and consider alternate income options, such as superannuation. With the guidance of our knowledgeable and experienced expert advisors, our evidence-based investment approach to financial advice will ensure you get the most out of what you put in, so you can life the life you deserve.
5. “Retirement happiness is directly related to finances.”
Many pre-retirees believe that their sole source of happiness during retirement will be directly related to their financial position.
Contrary to that belief, good health has actually been proven to be the key to a successful retirement for most.
Happiness as a whole is a function of a positive outlook, social engagement, healthy interpersonal relationships, meaningful activities, good physical and mental health, and a sense of purpose and accomplishment.
Financial stability undoubtedly does contribute to overall happiness, but it is not the be-all and end-all.
6. “Retirement spending will remain constant.”
Retirees tend to spend like “drunken sailors” in the first few years of this new stage of their life. This is before the novelty begins to wear off and they settle into a pattern. Things that may have seemed important at 60, become far less important at 80.
As time progresses, spending will move more towards things like family and health. Some will also go towards hobbies and passions.
Although up and down at the beginning, spending eventually smooths out as people make their way into retirement and get a better grasp on what they consider valuable and important enough to constitute spending.
7. “300 rounds of golf a year is always a good thing! (if you like golf)”
In retirement, as in all phases of life, too much of a good thing is often just that! TOO much of a good thing.
Whether you are playing golf, gardening, shopping or heading off on a cruise, do it because you want to. Not because you feel like you have to or because you have nothing else to do.
Retirement is the perfect opportunity to do whatever it is that you want to do. You’ve waited your whole life for this!
8. “Retirement is a life full of leisure.”
Many pre-retirees often feel that retirement will be a new life phase that is a 30-year long weekend.
Sure, everyone enjoys leisure, because it is a break from work! But what if we had leisure every day for 30 years? Where’s the break?
Weekends are great, but what if every day was a weekend? They would begin to lose their sparkle.
It’s important that retirees retain purpose and daily structure, whether through pursuit of part time work, volunteering or hobbies. This ensures that leisure time stays leisure time, and prevents retirement from becoming boring or lacklustre.
Well, which of these did you use to believe? If you answered ‘all of the above’, you’ve fallen victim to some common retirement misconceptions! But don’t fret, BIS Cosgrove is here to help.
When it comes to retirement planning, it’s never too early to start preparing for the Golden Years. Don’t get caught up in common retirement misconceptions, contact us today to talk to one of our expert Advisors & Super Specialists!
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