17 April 2024
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The three greatest fears of retirees and how to overcome them!

Ben Johnston
8 April 2022

Heading into retirement should be an exciting time for people. The anticipation of plenty of spare time to enjoy the things they love - travelling, catching up with family/friends or pursuing the hobby often dreamed of. It is absolutely understandable however that people will feel mixed emotions after working their entire life, ranging from being excited to uncertainty, fear and possibly even self-worth.

The reality however is that many people do feel very anxious in the lead up to retirement with the three greatest fears:

  1. Not having enough money to retire on.
  2. The physical and financial impact of having an unexpected health event.
  3. The dilemma of spending retirement savings or preserving wealth to leave to children and grandchildren.

1. Not having enough money to retire on

This is the greatest fear of most people. Many figures are often bandied around by advisers regarding the magic number that you need to have saved as you reach retirement (commonly about $1 million). These numbers add to the anxiety as they are general, but in reality, everyone has different needs and wants. For me, I believe it’s important to see clients have enough to sustain their lifestyle while keeping their home and having enough left over for unforeseen expenses. Having a broad magic number isn’t realistic, instead, people should assess and plan around their own circumstances.

The solution to avoid this anxiety is easy, by planning and getting good advice. The earlier you start planning for retirement the better, however, don’t ever feel like it’s too late, it never is. A lot of the anxiety is caused because people don’t know where they stand - what money they have available at retirement and what government assistance, if any, they are entitled to.

Getting proper advice will alleviate a lot of, if not all, of the anxiety because you can make objective decisions around your financial position, rather than burying your head in the sand. If you are worried about the cost of advice, many superannuation funds offer free financial planning services and the government also offers a free service called The Financial Information Service.

2. An unexpected health event

With age unfortunately comes the reality that you are more prone to illness and accidents. Heading into retirement, people fear the impact that their health will have not only on themselves but also on their loved ones. The financial concern of becoming ill in retirement adds to this worry also due to the cost of medical treatment.

The solution to minimising health concerns is to be proactive. By putting yourself first and making fundamental changes to some areas of your life that may cause a health issue down the track. Focusing on exercise, diet and mental wellbeing will contribute to a healthier retirement along with addressing excess vices such as smoking and drinking. All pretty obvious things but too often overlooked and undervalued as a way of staying healthy. Maintaining private health insurance is also important however if the cost becomes unsustainable seeking advice regarding government support available to you becomes increasingly important.

3. Spending versus bequeathing

One thing that has never made sense to me is when people forfeit the standard of lifestyle that they deserve in retirement, in order to preserve their money so it can be left to their family when they pass away. Of course, this isn’t an endorsement to burn through your life savings, it’s more an observation that some people in retirement live frugally, even when they do not need to because their sole focus is to leave as much money behind them as they can. By doing so they forfeit a lifestyle of their own and a comfortable retirement.

Estate Planning, either before or after retirement, will overcome the uncertainty around how much money you should bequest to your family. Planning around this will mean that you can make decisions that benefit you and the income available to you through your retirement years. It will also act as a way for you to decide what assets you may need to sell, and when, in order to achieve your objectives.

In summary, the ways to overcome your retirement fears are simple:

  • Plan ahead;
  • Seek advice; and
  • Be a little bit selfish.
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