Navigate your retirement planning like a ZEN master when the future is uncertain
Confidence is lagging when it comes to making financial decisions leading up to retirement.
Supported by new research by Fidelity International and research firm MyMavins who conducted research on 1500 Australians.
Not surprisingly two in five people surveyed said they don’t feel financially prepared for retirement. This lack of confidence in their finances is stopping them from doing things they want and enjoy.
It’s no wonder when the world we live in has been a bit like a roller coaster ride over the years.
Retirement planning has been made more difficult with high inflation, rising interest rates and stock market volatility.
But here’s the kicker, the longer you kick the can down the road, means less money in retirement…
One of two things will happen…
You’ll experience retirement regret.
Meaning, you’ll regret that you didn’t plan earlier. You won’t be able to do all the things you had planned in retirement.
Or, you’ll have to work longer than you want to. Working because you have too, not because you want too.
This research suggests that half of people are planning to work past the age of 67. We see this same trend with our own clients.
While nine in ten want to transition into retirement over time.
We know that these plans don’t always go according to plan, if ever. Many retire at a time that’s not their choosing.
We’ve identified three drivers of success and confidence in an uncertain world:
#1 Having a robust retirement plan
This can seem so simple, but many are heading blindly into retirement.
A well thought out retirement plan will set out the guidelines to follow. Not only achieve to a comfortable retirement lifestyle. But more importantly to live your life with a greater level of confidence.
But sadly many leave this too late or even worse don’t put one together.
Questions your retirement plan should answer:
#1 How much money do I need to last through my retirement years?
#2 When can I retire? Or at least make working optional?
#3 How BIG can I dream?
#4 How much income can I take each year and not run out of money?
#5 How much risk do I NEED to take with my investments?
We spend countless hours helping clients put these retirement plans together.
Recently with a newly retired client. We’d mapped out their retirement plan with them. Everything was set until investment markets took a dive.
Our client were now in panic mode…as you’d expect.
We take the time to set up retirement plans well enough that portfolios can withstand market downturns. Without impacting income drawdowns.
So we reran the numbers for our client. Even with the market decline they were not in danger of running out of money.
The relief and calm that came across their face was priceless…
Have you got a financial plan that sets everything out for you?
Can you rely on your financial plan?
Get your PDF copy of ENOUGH? here…
#2 Protecting your retirement income
Murphy’s law states. “Anything that can go wrong will go wrong, and at the worst possible time.”
For instance, the day you retire is the day markets tank or the minute you decide to invest, markets go down.
It’s impossible to get the timing perfect.
One of the biggest retirement risks for people within 5 years of retirement is sequencing risk. The order in which you achieve investment returns.
The danger period is 5 years prior to retirement and 5 years post retirement.
Make one wrong step in this period and your retirement dreams may be over…
So what’s the solution you might say?
It’s simpler than you might think. But because it’s simple, doesn’t mean it’s easy to implement. Many miss this crucial step in their retirement planning.
Understanding your cashflow leading into and through retirement…
Once you understand your cashflow, you can start to protect your retirement income.
Not only that, you can put in place buffers to protect your retirement lifestyle.
That’s why we spend a copious amount of time on this step. It’s the bedrock of any retirement plan we put together for clients. Your cashflow requirements will drive every tactic and strategy you use.
Do you know how you’re cashflow is going to fair leading into and through retirement?
What have you done to protect your retirement income?
You may also want to watch this video “Is $2 Million Enough To Retire Comfortably In Australia?”
#3 Tailored investment strategy
As you approach retirement many don’t change or even review their investment approach.
But it’s another aspect many get horribly wrong.
While you are working, you are predominantly focused on accumulating financial assets over your working life.
After two decades of helping clients plan for retirement, we know keeping this same approach rarely works.
While you are in the accumulation phase you’re focused on four things:
#1 Maximising the return on your investment
#2 Dollar cost averaging (investing on a regular basis, i.e. super contributions)
#4 Accumulating financial resources
#5 You have a regular income and the time to recover from severe market downturns
As you approach and transition into retirement, your thinking needs to shift.
Your focus needs to be on these four areas:
#1 Return on income, funding your retirement income
#2 Decumulation – for most people their assets will reduce over their retirement as they start to use that money to fund their retirement lifestyle
#3 Building a BIG enough safety margin to stay afloat when investment markets fall
#4 You remain exposed to investment markets. In other words you don’t have the capacity to deal with investment losses as you would have in your working years.
But that does not mean avoiding risk altogether…
It’s the decisions you make between your working life and retirement life that will either harm you or serve you.
Once again, your cashflow is the driver of the investment strategy you adopt. While you might like taking on risk.
This step will allow you to determine the sweet spot when it comes to the investment return you need to make your plan work.
Once you know this, you can identify the most appropriate investments that will match your retirement plan.
This is an area many struggle with. Mainly because they have never travelled this journey before.
Do you know the investment return you need, so you don’t run out of money in retirement?
Is your investment strategy protected from “sequence of returns risk”?
You can’t achieve a Zen state of mind alone…
No one knows what the future’s going to hold, but you can take steps to remain calm and confident when the future is uncertain.
It can be extremely scary for some…
There are so many inputs that go into your retirement planning, it’s hard to know where to start.
It all starts with a plan. A roadmap to follow and someone to help you navigate your retirement journey. Whether that’s us or someone else.
There are many life events to manage leading into and through retirement.
Some of those include retiring, sudden retirement, downsizing a home, health issues and losing a partner to name a few.
A key finding of the study by MyMavins was the earlier a person starts their planning and more importantly with a financial planning professional. The more confident and prepared they are…
Imagine having the confidence to spend and comfort when unexpected things happen your retirement income may still be met.
The danger of waiting too long…
For many people they are waiting for the perfect time. The longer you wait to get your retirement planning in order, the less money you’ll have in retirement.
One of the BIGGEST mistakes we see people make is waiting too long.
In fact, in all my years of doing this, there’s one phrase that I’ve never heard from any client EVER: “I really wish I would have waited a little longer to do this.”
And, if you’re waiting for the “perfect time”, that’s never going to happen.
Start planning for your retirement today by booking in your Retirement Clarity Call with Glenn on the calendar below.
Glenn Doherty – CFP – Financial Planner | Retirement Planning Made Simple for aspiring grey nomads and avid travellers within 7 years of retirement
We work with people in Adelaide and around Australia via virtual meetings!
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