So you’ve hit 60: who’s excited? Retirement is just moments away – although receding steadily for later retirees as the federal government pushes the pension age envelope.
But many people have taken these steps. There’s the expected freak-out as you question if you have enough money for your future. All the experts are saying you need at least $1 million, and your $257,000 isn’t anywhere close. How will you survive? Should you work longer? Will your employer allow you to stay longer? Can you keep doing this work longer? Will you qualify for the age pension? It’s definitely a time for questions.
There is also a fear of leaving the workforce. It’s what you’ve done all your life, so to just finish can be daunting. Who you are can easily be wrapped up in what you do: no longer working can leave a hole in people’s lives and identities.
Another question many should ask before retirement is what you’ll actually do. Filling up the days can be a challenge. If you haven’t planned properly, you can quickly get bored, lonely or even feel like a burden to others. Partners who have formed their own lives in earlier retirement may feel put-upon now their partner is home 24/7.
Also, your kids are having kids – and with child care so expensive and hard to find, those in their 60s who have retired are thought of as “free babysitters who have nothing else to do.”
Medical concerns arise at this age, senior cards offer discounts on many things, but cheaper medications and health care usually come only from the federal government. There’s lots to think about and you need to have a good plan.
SEE YOUR FINANCIAL ADVISER
You need to check in again to see exactly when you can retire and how long your money will last. Don’t think 65 is the magic age.
- SET A REALISTIC RETIREMENT DATE
If you don’t want to retire, don’t. Just make sure you have enough money, as getting a job when you’re 75 might be tough.
- START TO THINK WHAT YOU’LL DO IN RETIREMENT
Get a hobby, buy an old car to restore, plan holidays, book golf lessons. Just don’t try to do everything on the first month.
- DON’T FORGET RETIREMENT IS 20 YEARS-PLUS
You shouldn’t automatically take all your money out of super once you retire, or put it all into cash. Keep pace with inflation.
- MONEY IN PENSION ACCOUNTS CONVERTED FROM SUPER
Once you are over 60, it is held tax-free. This means there’s no tax on income earned in the fund or growth in value.
- THERE IS A MISCONCEPTION
There is a misconception that, as you’ve paid taxes all your working life, you will get an age pension. Not in Australia.
Like many small business owners, Bruce and Christine Gearing spent so much time on their business they had hardly left to manage to their personal finances.
“It was all too hard for us,” said Christine, a nurse-turned bookkeeper for her husband’s car compliance firm in Brisbane. “We bought shares and lost money. We also wanted to plan for our retirement and, specifically, for Bruce to cut his hours.”
Eight years ago they resolved to get a financial adviser. They shortlisted four and quickly settled on Brendan O’Reilly, a planner with Bridges Financial Services, whom they met at a retirement exposition.
“Unlike other advisers who wanted to charge us $1,000 and for us to go into high-risk investments by borrowing up to $1 million, Brendan listened to us and explained patiently again what we needed to do,” Christine said. “He sorted out all our financial woes. Everything was transparent. He taught us how to budget, signed us up for Xero (accounting software) so we could see immediately how much we spent a month.”
The Gearings also bought an investment property next to a golf course, which they intended to be their retirement home. In January this year, the Gearings sold their seven-bedroom family home in Brisbane, where they had been running a homestay for students, for $810,000.
“The golf-course house was under four feet of water during the Queensland floods of 2011, but has been rebuilt by our insurer.”
With O’Reilly’s help in managing their SMSF, plus the proceeds from the sale of their house, Bruce and Christine have accumulated enough to see them through their old age. They pay O’Reilly $3,520 a year to advise on their SMSF and investment portfolio, which includes a yearly reassess to their strategies.
Today, Bruce works 4 days a week and plays golf every Tuesday. It’s a far cry from the days when the Gearing’s business, which carries out compliance tests for imported cars and caravans, had up to six employees and Bruce worked 100 hours a week.
Christine retired two years ago, when she turned 60. But she still does the books at home, when she is not looking after the grandchildren.
“I also look after my dad, who is 93 and in a retirement home,” she said. “I really enjoyed being retired and taking turns to look after my grandchildren.”
“Bruce has promised that come November 15, he will retire. But he has given me several retirement dates before, so we’ll just have to wait and see.”
OUR PANEL’S ADVICE
One of my clients, Dr. Tony, told me: “Matt, 60 to 75 are the best years of your life.” Dr. Tony’s argument was compelling. This decade will be the most rewarding of all if you’ve been smart with time and money. From a financial perspective, asset allocation and estate planning will continue to be important.
We now see parents in this decade helping children with the purchase of their first home. If you assist one child and not another, update your will to ensure you treat your children equally. Seek advice about super contribution rules: up to your 65th year you can contribute three years’ contributions in one year.
Retirement is either upon you or near. This can be a fun time if you start moving out of employment and work part-time, using some super to fund your lifestyle. Importantly, you must be both debt-free and kid-free or this won’t work well. You may receive an inheritance. Can these funds help achieve some goals?
THE REALLY SIMPLE GUIDE TO MONEY | OCTOBER 2015
The information provided in this page is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs. You should seek independent advice from your financial adviser before making any decisions.
AUSTRALIAN MORTGAGE AND FINANCIAL ADVISERS (AMAFA)
Phone: 07 3378 2056
Fax: 07 3378 2069