Plan, Procrastinate, or Go Solo.
In 2019, Australia’s retirees totalled
3.9 million. It is expected that number will increase by 500,000 in the next year, and by 2025, almost 5 million Australians will have decided to retire (ABS). That means, over 20% of the Australian population will be retired.
Some will be retired in comfort with freedom to pursue the lifestyles they have enjoyed or aspired to during their working lives. For others, it will be a time of cut-backs and restriction.
If you fear that your retirement will be more like the latter, it doesn’t have to be that way.
I am an adviser with over 25 years’ experience and have often been asked, “so why should I see a financial adviser?”
As financial advisers at Kelly Wealth Services, we believe that planning for retirement takes a lot of the uncertainty away and allows our clients to go into their retirements with confidence, comfort and a sense of purpose.
According to Adviser Ratings, 23% of Australians between ages 55 and 64 already see a Financial Adviser and 17% intend to see one.
The fact is not everyone needs a financial adviser, and according to Roy Morgan Research only 12% of Australians use a financial adviser. But considering the average balance in super for the 50yo male is only $214k and for 50yo females its $157k, I would argue that most Australians need help from a financial adviser at some points in their financial lives.
One of the problems Aussie pre-retirees face is actually finding a trusted financial adviser. Just last week, the last of the big 4 banks closed their financial advice arm. So CBA, ANZ, WBC and NAB no longer provide licenced financial advice as a service to their customers. Australia had over 23,000 registered financial advisers. By 2023 this number is predicted to reduce to 13,000. This will not only leave an estimated 30,000 Australians unadvised (they had an adviser that has left the industry) but the almost 1 million retiring Australians may struggle to find quality financial advice (AdviserRatings).
On the positive side, professional standards and education standards for financial advisers has improved significantly, as has transparency of fees and the introduction of the duty to ensure all advice is in the best interest of the client, ‘Best Interest Duty’. All this should mean a better outcome when Australians do seek advice from a licenced adviser.
Over the next few weeks, the Kelly Wealth financial advisers will write a series of best practice tips and strategies in the areas of retirement planning, actual retirement, building wealth and more.
First up, here are the steps we recommend when Planning for Retirement:
1. Determine how much you need to live each year. If you haven’t prepared a budget, it’s a good time to do this. It is essential that you have an idea what you need to meet your ‘have to costs’ (what you need to live comfortably and be healthy), ‘lifestyle costs’ (what you would like to spend on entertainment, enjoyment and hobbies) and those ‘bucket list items’. Have fun with this. Most people think doing a budget is a chore (or worse). Make it fun. Think about the enjoyable or purposeful things you have always wanted to do in retirement. Add in what’s on the bucket list?
2. Get to know your retirement investments. Understand your super - how it’s invested and what it is expected to earn, and what investment risks its exposed to. Analysing your investment property or share portfolios is equally as important. You need an understanding of what you should expect these assets will return to you as a NET income (income after all costs) and what are the real risks. It is essential you know what return to expect and that you understand all the possible risks. According to Core Data Research the primary investment driver for retirees is stable and regular income. The biggest stress for retirees is income uncertainty and capital running out early.
3.
Determine if you need to spend some of your capital in the lead up to retirement
and in the first few years of retirement. Things like upgrading cars, purchasing toys like caravans or boats, upgrading the house, paying off debts.
4. Hobbies!! We can’t stress the importance of this. When you retire, you will gift yourself on average an extra 40 hours per week. What hobbies or pastimes do you and your
spouse enjoy? Are these as or more fulfilling than the work you are currently doing? Do these cost money? This is essential to consider. If you don’t, you may find yourself back in the workforce or on the negative side, divorced, or worse, suffering depression (this is a growing statistic for retirees).
5. Will you still be the bank of mum and dad? This is very common. Many of our clients still support children in their retirement years. It can be hard to plan for but is important to consider.
Once you have this information you are ready for the next step, which we will reveal in our next article.
At Kelly Wealth Services our advisers offer a one hour no cost consultation (scan QR code). This can help you understand the benefits of advice & if you should pay for professional advice, or go solo.
We make the steps for retirement planning easier, so no need to procrastinate.
It’s time to get excited about planning!