Good to Great: How to Scale With an Outsourced CFO

We all make mistakes. When it comes to retirement, though, it’s better to realise your mistakes early on and correct your course so you can still reach your goals. Whether it's putting off planning, or ignoring growing aged care costs, we’re going to take a look at the 7 big mistakes people commonly make when planning for retirement.

1. Neglecting to Have a Formal Plan

Even if you’re regularly sacrificing some of your salary to your super account, if you don’t have a formal retirement plan, you have no way to measure your progress. It’s impossible to know if you’re reaching your goals if you don’t have a plan to begin with.

Make sure your plan includes specific, measurable objectives, and if you have any questions, talk with a financial adviser. You may need to change your plan over the years as your circumstances change, but start with a written plan and then revise it when necessary.

2. Starting Late

When it comes to saving for retirement, the most valuable asset you have is time. The more time you have for your money to grow, the easier it is to reach your goals. If you procrastinate, you miss out on precious time. If you haven’t yet started salary sacrificing, start now.

3. Not Saving Enough

Think about it this way: you’re either saving for retirement or spending your retirement today. When you look at it from this perspective, your everyday spending choices and habits become simpler.

It’s not really a decision of whether or not to spend, it’s a decision of when to spend. If you spend your money now, you’re not allowing your money to compound so that it can support you later. In order to know if you’re saving enough, you’ll need to create a comprehensive retirement plan. Once you have the plan, stick to it.

4. Underestimating Health Care Costs

Health care has changed so much over the years that it’s difficult to predict what it will look like in the future and how much it will cost. Most people find, however, that they’ve underestimated how much health care will cost once they retire. Speak with your financial adviser about how much you should plan for health care costs during retirement.

5. Forgetting About Debt

When people calculate how much they’re going to need to live on during retirement, they generally include items like housing, food, travel, utilities, and transportation, but many people neglect to include debt repayments. This is fine if you don’t retire with any debt, but you’ll throw your plan into disarray if you retire with debt and don’t have the means to repay it. The best solution to this problem is to pay off all of your debts before you retire. Make sure to include debt repayment as part of your written financial plan.

6. Not Consolidating Super Accounts

If you’ve worked at several different companies, you probably have several super accounts out there. Each one has its own fees, and when you add up all the fees, you may find that your money isn’t working for you very well.

Solve this problem by consolidating your super accounts as a part of your formal retirement plan. Your money will be much easier to manage, and you will save significantly on fees.

7. Neglecting to Manage Your Investments

Let’s say you start sacrificing more of your salary, sending it to your super account, and work on getting out of debt. These are all fantastic financial moves, but if you neglect to manage your investments, all of that work could be derailed.

Entrust your super funds to a firm that will manage your investments and keep your financial plan on track. Your risk factors should be in line with your written plan, and your investments should be reallocated from time to time.

By avoiding these mistakes, you’ll put yourself in a much more comfortable position as you approach retirement. Feel free to contact us at Altus Financial to speak with an adviser about your own retirement plan.