Everyone wants to live well in retirement, right? Yet, according to the ANZ Survey of Adult Financial Literacy in Australia, only 37 per cent of Australian adults* know how much money they need to retire.
Not having a super savings target is only the beginning of financial issues facing many Australians. Five other retirement planning mistakes are high on the list.
Mistake 1: Failing to plan for the financial future
We’ve all heard ‘by failing to plan, you plan to fail’. Yet, many Australians only start thinking about retirement planning in their 50s.
Ideally, it’s best to regularly save small amounts when you’re young. Over time the savings impact little on your lifestyle, yet amount to a sizable nest egg in retirement. When you think about it, money saved over the term of your working life may need to last another 20 to 40 years in retirement. So making an early start makes sense. But for those aged in their 30s and 40s who haven’t started planning, the news is good. It’s never too late. With the handy live updates that MyProsperity provides, you'll be able to see the benefits of priortising your retirement planning at the click of a button.
Mistake 2: Believing it’s too late to start retirement planning
Even if you’re in your 50s, it’s not too late to start retirement planning. You still have 15 years to boost your savings. Just by investing in superannuation, adding to savings outside of super and repaying your mortgage, you can substantially strengthen your retirement position. With the help of MyProsperity, you will be able to see the benefits of starting your retirement planning early with live updates of your superannuation and retirement funds.
Mistake 3: Withdrawing money too early from superannuation
The COVID-19 pandemic has seen an unprecedented amount of young people dipping into their superannuation. While the early release of cash may solve problems in the short-term, it’s likely to create long-term financial issues in retirement.
An early lump-sum withdrawal means you lose the compound interest you could have earned on that super money. And depending on your age, this could equate to thousands of dollars less in retirement. Plus, if your super account drops below $6,000, any linked life insurance and TPD (total permanent disability) insurance may be automatically cancelled. If this is likely to affect you, contact your superannuation fund and ask to ‘opt-in’. Otherwise, you may find yourself uninsured.
Mistake 4: Leaving your money in the bank
With so much financial uncertainty in the world, it is tempting to leave large deposits in the bank. If nothing else, it feels safe. While bank accounts are great for managing everyday spending, they’re no longer ideal for retirement wealth building. Shares and other investments generate better capital growth over the long-term.
Mistake 5: Panic withdrawals
Minor market setbacks are part of the course of investing. Resist the urge to panic sell unless your financial planner or stockbroker advises you to do so. The rule is if quality investments suffer a decline, then it’s usually the worst time to sell. Overall, panic selling can lead to higher losses in the long-term. So, stay put, ride out market fluctuations and stick to your original investment plan.
How much super do you need to retire?
Check out our recent blog for insight into how much super you need to retire here.
The next step
Regardless of your age, the first step in securing your retirement future is to make a plan. With help from Carbon Wealth and MyProsperity, you will have a strategy in place which is available at the click of a button. If you’d like to know more, talk to us at Carbon Wealth. We’ll give you peace of mind while making your retirement dream a reality.
*ANZ survey of adult financial literacy
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