Biggest Retirement Planning Mistakes

Retirement planning can be difficult because it’s hard to predict just how many golden years you’ll have and how much money you’ll need to make the most of them.

In this blog, we share 5 of the biggest retirement planning mistakes the Certified Financial Planners® at Precision Wealth Management often see.

And not all of them are to do with money – some are about lifestyle planning too.

Want personalised advice about how to build wealth for your golden years? Learn more about our services here or give us a ring today on 1300 200 012.

You can also watch the video on the 5 common retirement planning mistakes we see here.

5 Common Retirement Mistakes

1. Don’t plan early enough

We’re not suggesting that you begin planning your retirement on the day you start working, but if you leave it too late you may not be able to achieve the goals and lifestyle you’re hoping for.

For example, if you’re 60, you’ve got $1 million and ready to give up work, but you want a lavish retirement and you’ve decided you need $1.5million to make that happen, there’s not a lot you can do to bridge that half a million dollar gap in the last year of work.

But if you make small changes a decade or so before your anticipated retirement date, small changes can help bridge the difference over that 10-year period. 

To determine how much money you need for your desired retirement, you’ll need to give some thought to how you want to spend your golden years, for example, do you want to spend them travelling around Australia, playing golf, sailing etc.

2. Invest too defensively

People who retire sometimes think they’ve got to invest quite defensively because they’re drawing down on their money, and while that is true to some extent, you do still have many years on the horizon for investment potential. 

For example, if you finish work at 60, you could be investing for another 30 years.

So, if you don’t invest in enough growth assets, you may not achieve a high enough return to achieve your goals or outpace inflation.

3. Don’t stay active

In our opinion, humans weren’t built for 30 years of leisure, so having an idea of what you’re going to do to stay mentally and physically active during retirement is really important.

4. Underestimate the funds required

Many people underestimate how much money they’ll actually need for the retirement they want – especially if they don’t factor in inflation.

As financial planners, we do know that retirees need a significant amount of money set aside if they want to fund a decent income (increasing with inflation) for decades.

If you’re content with a modest retirement, you’re part a couple and you’re eligible for the aged pension, you don’t need a huge amount of money because the aged pension will do some of the heavy lifting for you.

On the other hand, if you want a lavish retirement, for example $100,000-$150,000 per year, you will have to be fully self-funded as you won’t receive the aged pension and the amount of capital to fund that for 25 or 30 years can be quite significant.

5. Don’t spend enough early in retirement

We see many people who don’t spend enough and enjoy their lives in the early years of their retirement while they’re younger and more active.

This is because a lot of retirees receive stick to the minimum drawdown amount that account based pensions must draw, as they’re trying to make sure they won’t run out of money during their later years.

However, we find some who live frugally in the beginning and only receive those minimum annual payments, get into their 80s and have more money than they can actually spend – because they may not be as active or travelling as much in those later years.

Biggest retirement planning mistakes

Do you need help with financial planning for retirement?

At Precision Wealth Management, our team wants to understand what kind of lifestyle you want to enjoy during your golden years, before creating a tailored wealth creation strategy for you.

Get in touch with our Certified Financial Planner ® on Brisbane’s northside today by calling 1300 200 012 or send us a message here.