‘We want to buy a home and get ready to retire but have we got the right advice?’

Sep 17, 2020
Before heading down the path suggested by a financial planner, it's important to know both the risks and rewards. Source: Getty.

Q: I am 63 but soon to be 64 and retired from my job in mid-2019.  My husband will be 65 in January and plans to work until mid-2021, with some long service leave added on to the end of that before he officially retires. We are presently renting but would like to buy a house in the next three to six months. My husband is salary sacrificing into SuperSA from his wages. I also have some funds in SuperSA but am not currently making contributions, and I have kept my super in cash so that we have available funds to help pay for the house without requiring a mortgage.

We both receive a monthly income via a transition-to-retirement allocated pension with another super fund. This pension was set up by a financial planner we have been seeing but he has kept our invested funds in a high-growth option, which we’re not comfortable with.

We feel confused about where to go from here on how to best set ourselves up for retirement. We are unsure whether to stay with the financial planner as we pay ongoing fees, and he has a vested interest in the company handling our allocated pension because he receives an adviser’s fee from that company. We are also unsure if we are paying too much for his advice or if there may be a better way to do things.

As such, we’d love to hear feedback from someone who has no vested interests in recommending certain products because I’ve been losing sleep over some of these issues!

A: The role of a financial adviser is not to make investment decisions on your behalf, it is to help you make the best investment decisions for yourself. I always say that when it comes to having the right investments, there is a simple ‘pillow test’ that you can apply. If you can’t sleep at night because you are worried about your investments, you have got the wrong investments.

If you are invested in growth assets such as shares and property it is important to understand that these are long-term investments and in the short term they can be quite volatile. If you intend to use some of these monies to purchase your new home and, from what you have said, that will be in the short term, exposure to the high-growth option could be very risky and mean you may either need to delay the purchase of your home in order to ride out a fall in the value of your investments or worse, crystallise loses.

Good financial advice costs money, what you really need to look at is the value of the advice. The easiest way to do this is to tell the adviser what you would do without their advice, then let them run the numbers and show you how your suggested strategy stacks up against the strategy they advise.

Given that you are approaching Age Pension age, any advice you receive should take into consideration your financial position when you purchase your new home and how you will generate the income you need throughout retirement (which in the early stages, from what you have said, is likely to be from a combination of employment, superannuation and possibly the Age Pension) because understanding these things interact and how things like the Work Bonus can assist with pension entitlement should be part of the advice, as well as looking at the longer term and ensuring you have good estate planning.

At the end of the day you need to have a good relationship with your financial adviser and like all good relationships there should be trust and mutual respect. If you just don’t click with a particular adviser, that’s ok, you just need to find the right adviser for you.

If you’ve got questions about retirement income or about downsizing in retirement, don’t miss our FREE, online masterclass at 1.00pm AEST on September 22 with veteran finance guru Noel Whittaker, downsizing expert and author Rachel Lane and Kate Melrose, an expert on land-lease communities at Ingenia Lifestyle. Click here to register to attend.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.

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