Five things to know about your finances
It’s disconcerting how life has a clear pathway right up to the point of retirement and then becomes full of uncertainty. We leave school, do further study, get a job, build a career, find a partner, buy a house, have a family and pay off the mortgage. Not necessarily in that order, of course – partners, houses and children are optional – but most people have a sense of what their next step is along the path.
Yet when it comes to thinking about retirement, there are so many unknowns. There is no guidebook which sets out the best time to retire, how long you will live, how much money you will need, and where to invest it.
Here are some of the most important things you need to know before you retire.
Plan to live a long time
Fortunately, none of us know how long we are going to live. However, the worst possible outcome in retirement is that you run out of money before you run out of life.
You need to make whatever money you have last the distance, and it could be a very long distance.
People who reach the age of 65 can now expect to live to around 90, and longevity is increasing. While women still outlive mean on average, the gap
between men and women is closing. If you have a modest amount of money for retirement, have back up plans for funding the last part of retirement, such as downsizing your house or using a reverse mortgage.
The best investment you can make is in your health
Interestingly, while our life spans are increasing, our health spans – that is, the years of living without disease – are increasing at a slower rate. This means the number of years we are living with disease is increasing. Health care costs can quickly eat into retirement funds. Being ill detracts from your ability to enjoy retirement.
So, while you might have worked and saved hard to fund your retirement, poor health can prevent you from making use of your money for the pleasurable things in life. Being wealthy gives you no advantage over someone who is less well off if you are ill or even worse, dead!
Invest in your health through exercise, diet and medical care.
Know that if you don’t spend your money, your children will
Money has no value unless it is spent. It is not something to be accumulated just for the sake of it. One of the hardest things to learn at the point of retirement is how to de-cumulate wealth instead of accumulating it.
Having worked and saved hard to build up a retirement nest egg, it’s not easy to flip the switch and start spending it. If you aim to preserve your retirement capital for your children’s benefit and to live off the investment returns from the