Retirement is one of life’s biggest milestones — a shift from decades of earning a regular wage to living off superannuation, pensions, and investments.
While it can be an exciting new chapter filled with freedom and possibilities, it also comes with financial challenges. Unlike your working years, there’s often less room to recover from money missteps, and even small errors can snowball into lasting problems.
That’s why understanding the most common financial mistakes in retirement — and how to avoid them — is so important for ensuring security and peace of mind in the years ahead.
Sydney-based Wealth Coach Andrew Woodward from The Investor’s Way says one of the biggest mistakes is “not knowing your numbers.”
“Relying on memory and ‘on-the-run’ money management is not going to cut it in retirement,” Woodward warns.
“While you were working and had the capacity to overcome mistakes, retirement is a different proposition and requires that you know your numbers. Understanding what is coming in and going out is crucial to ensuring you manage your money for now and for the period of years you have remaining.”
Overspending is another financial blunder that Woodward cautions against and cites as “one of the biggest reasons retirees end up in stress about money”.
“Overspending is a habit that most have carried into retirement from earlier times and has disastrous consequences,” Woodward says.
“Having a money management plan is crucial to set yourself up in an environment that prevents overspending, especially on those cute grandkids.”
He also stresses the importance of knowing your entitlements, from government assistance to transport and medication discounts, and understanding the best way to draw down super.
“After spending years to build up your superannuation entitlements it is important that you know the best ways to draw down your superannuation without risking unnecessary taxes or waste,” Woodward explains.
“Since this is going to be one of your most substantial income sources it is worth knowing how to plan to get the most out of it for the longest possible time.”
Lastly, Woodward stresses the need to manage your investments and not “switch off” after “having built up your investment portfolio to support you in retirement”.
“While you may not be adding to your investments at the rate you once were, it is still important to manage them as closely, knowing when to sell the duds and knowing how to derive the most income from them,” he says.
“Now that you have more time, this is a great way to boost your income and wealth by spending more time knowing what is going on with your investments.”
Founder and CEO of Stockspot, Chris Brycki, agrees. He sees retirees failing to adjust their spending to match a reduced income as the biggest mistake.
“Many retirees rely on a fixed income from sources such as age pensions, super, or investments, which may not keep pace with inflation,” Brycki highlights.
“If they continue to spend money at the same rate as when they were working, they may find themselves running out of money later in retirement.
“Some retirees also overlook the potential impact of long-term care costs. While they may have planned for basic living expenses, they may not have accounted for the potential cost of in-home care, assisted living, or nursing care, which can be significant. This expense often falls on loved ones instead.”
The good news is that with a bit of planning, most of these mistakes can be avoided.
Woodward advises planning ahead before you retire.
“Put the time in early to know what you will have to work with in retirement before you get there. This will enable you to make any adjustments to your current lifestyle in preparation for when you retire,” Woodward says.
Having a money plan in place is another measure retirees can implement to avoid costly mistakes and to “create an environment for success that supports you and your lifestyle”.
“A money plan is automated and puts money where it needs to be when it needs to be there,” Woodward says.
“The main difference between a money plan and a budget is in the automation. A budget is a static model that does nothing to support you when you need it most.”
Finally, both Woodward and Brycki urge retirees to seek expert financial advice — from understanding entitlements and superannuation to setting and reviewing a budget.
With the right planning and support, retirement can be less about money worries and more about living the life you’ve worked so hard to achieve.
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