Retirement is a little like scaling the summit. From the bottom you can see the peak. As you scale the mountain from the bottom, at times you lose sight of the summit.
There are challenges you need to overcome to safely scale the mountain and reach the summit.
But what are the blind spots you need to overcome or be prepared for that you’re not aware of?
Retirement is no different. Without a solid and well defined roadmap. You won’t have something you can rely on to make confident financial decisions.
Decisions about money, spending, lifestyle, investments and when you can retire. Along with whether you’ll be okay financially in retirement.
Over the year we’ve spoken to over a hundred people thinking about retirement. Maybe you’ve been one of them.
Many are stepping into the unknown without the right preparation.
It’s a little like climbing a mountain without a map, the right preparation or a guide.
It’s only going to end one way.
We’ve identified the top Blind Spots which may derail your retirement dreams…
#1 Underestimating your Enough Number
The number one concern from people who download our Enough book is running out of money.
People are struggling to work out how much money they need for the rest of their life. Without fear of running out of money.
Here’s the thing, if you don’t know this number. You can’t confidently make decisions about your retirement and money.
Nor can you confidently decide when to give up your 9-5 job or alternatively reduce your hours.
Until you know what your enough number is.
You can’t make decisions about:
- When to retire?
- How much money can you safely spend in retirement?
- How much investment risk you need to take on?
- How to invest?
- What strategies and tactics you should be consider?
…and many more.
How many of these questions could you answer with absolute confidence?
#2 How long is your retirement going to be?
Gone are the days where you work a physical job your whole life. Only to retire and live for another 10.
Retirement in the modern era can last 20, 30 or ever 40 years in some cases.
Life would be far easier if you were handed an envelope with your use by date in it. You could spend up and enjoy life to the fullest.
Right to your last day…
Unfortunately, that’s not going to happen.
So what’s the next best thing?
Delving into the evidence to uncover how long you might live. While it’s not definitive, at least it can be used as guidance.
Research by Alison O’Connell, a researcher and actuary, looked at the lifespan in six countries.
In her research, she found men underestimated their lifespan by four years. Women were expected to live six years longer than they had expected.
For people aged 65 today. The average life expectancy is 87 years for women and 84 for men according to Challenger.
If you’re part of a couple, your life expectancy increases again. Increasing the chances that one of you will live well into your 90’s.
Good news, you’re going to have plenty of time to pack in as much as you can into your retirement.
The bad news, it all needs to be paid for. You could end up with too much or too little when it’s all over.
Sound planning will give you the confidence and peace of mind that your money will last. Not only that, but make those retirement years the best years of your life.
#3 Hidden Investment Risks You’re Not Aware Of…
Attracted by the bright shiny lights, but hidden below is a ticking time bomb…
Ready to blow your retirement dreams up in smoke.
You only need to take one look behind the curtains of some of the largest super funds in the country.
Built specifically as a one size fits all with a focus on working members.
While the returns may give you comfort. Pull back the curtain and you’ll find high levels of risk.
Lurking under the surface, ready to strike fear into you as you approach retirement.
While accumulating your nest egg is all about maximising your investment return.
As you approach retirement. It’s all about income and your margin of safety…
The best way to minimise your level of risk is to understand the return you need to achieve to make your nest egg last.
Not too much…not too little…just the right amount to see you through retirement safely.
Your investment allocation is a fine balance between safety, liquidity, long term growth and longevity. It’s no easy feat…
#4 Overconfidence in your investment decisions…
Seemingly more difficult than ever is it to avoid the drama of investment market moves and news.
It’s literally on tap all day long…
You’d be forgiven for thinking you need to keep abreast of all this information to be a good investor.
The truth and the evidence suggest otherwise…
Charles Ellis, in his famous book “Winning the Loser’s Game” explained through a tennis analogy.
Why active investing, whether you pick shares yourself or use a fund manager is a losing proposition.
For amateurs, winning a tennis game is all about making fewer mistakes or making less errors than your opposition.
The player who makes fewer mistakes generally wins the game.
It’s only professional players making brilliant shots that win. Professionals win points and amateur lose points.
Being an amateur tennis player myself, I can concur with these observations.
Successful investing is all about minimising mistakes.
SPIVA Australian scorecard backs it up with evidence.
SPIVA keeps track of active fund manager performance versus their respective benchmarks. They have over 20 years of evidence.
While at times active managed funds can outperform over short periods of time.
Over a 5, 10 and 15 year period over 80% of fund managers underperform the investment benchmark they are investing in.
If you are trying to manage your own money with the expectation of beating share markets. You are on a hiding to nothing.
Unless you are a professional investor, it’s time to focus on making fewer mistakes…
Worried about the long term performance of investment markets?
While investment markets and world economies will always face some type of challenge or risk.
Mark Hebner, an author, sums it up simply.
“With a total market value of over 51 trillion dollars, annual profits of over two trillion dollars, more than 13 thousand CEO’s worldwide, and more than 82 million employees selling products in 195 countries, it simply isn’t reasonable to believe that Capitalism Inc. will go out of business.”
Minimising investment mistakes and a vote of confidence that Capitalism will continue. Will see you safely see your retirement out with more confidence…
#5 Plan…What plan?
Do you have a documented plan for how you are going to achieve a comfortable retirement?
How are you going to fund your yearly income knowing it will last the distance?
In Fidelity’s research paper, Retirement: The Now and The Then. One in ten have a documented retirement plan.
Of those who have one, only a third have vague plans at best.
Imagine for a moment, you boarded a plane. The pilot comes over the speaker and says…
“This is your pilot here, we’re about to take off. We have no plan on where we’re going but we’ll end up some place.”
How would you feel?
The research paper produced by Fidelity went on to state over half of pre-retirees are not looking forward to retirement.
In fact, two in five don’t feel they are on the right track to be financially prepared.
Here’s the thing, this uncertainty adversely affects your physical and mental health.
The BIG issues pre-retirees are facing:
- How do they spend their time in retirement?
- Where to live?
- How much can they spend in retirement?
- Future healthcare needs.
- Will they have enough?
Retirement planning is exceedingly a harder and complex task to complete.
Uncertainty, retirement system complexity and no expertise in retirement planning make it difficult for planning in today’s tough environment.
The importance of having a sound plan to guide your financial and lifestyle decisions cannot be underestimated.
Not only that, a guide to keep you on track at all times is critical now more than ever…
Want some help to work out if you are on track for a comfortable retirement. Let’s have a chat and give you some clarity around your retirement and maybe a roadmap to help you reach retirement in sound financial shape.
Book your Retirement Clarity Call here where we’ll help identify some of your hidden blind spots.
Glenn Doherty – CFP – Financial Planner | Retirement Planning Made Simple for aspiring grey nomads and avid travellers within 7 years of retirement