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If you’re on the path to retirement or already in retirement, you’ll want to make sure your money will last the distance.

We are now all living longer, fuller lives and for many people retirement can span just as long as your working careers. Most Australians will spend at least 25 years in retirement or longer.

Making your retirement money last, all comes down careful retirement planning and estimating life expectancy to ensure your money will last. The Australian Bureau of Statistics estimates an Australian life expectancy at birth is 80.9 years for males and 85.0 years for females in 2017-19. While these figures are authoritative and accurate, they are estimates from birth. They are relevant for today’s newborns but not for a person planning for retirement.

Reasons continued growth in life expectancy are due to the improvements in health services, safer worker environments, medical and technological advances, which have assisted Australians to live well into 80’s and 90’s.

One of the biggest risks in retirement is longevity, which is the risk of outliving your savings. As no one really knows how long they are going to live, managing this risk can be difficult.

So, the burning question is: how do we make retirement funding last the distance?

Ways to make your money last

There are several ways, to ensure that your money will last as long as you do in retirement, here are our helpful tips to make your money last in your retirement:

Have a retirement spending plan

It’s important to understand your spending habits and patterns will change over time during the course of your retirement as this will be determined by your health and mobility.

Prepare a retirement spending plan/budget, to make sure you don’t spend too much too soon. Ensure to keep in mind, the way you spend money will change over time, you’re spending habits are likely to be different from the beginning of your retirement to later on, when you’re likely to have health issues arise and you will be less mobile.

There are three stages of retirement; early active retirement, where you are likely spend the majority of your time travelling and spend a lot of time outside the home; middle years, when health problems may emerge and activity will decrease; and later years when more money will be spent on health and aged care.

Moneysmart retirement planner can figure out your income when you retire and the budget planner can help you work out where your money is being spent.

Need help working out a spending plan? Reach out to a financial advisor, who can provide professional guidance to assist you achieve what is most important to you.

Why not book in Oracle complimentary consultation and see how we can help you better plan for your retirement.

Minimise your fixed expenses

If you want your retirement money to last, then you need to minimise your must-have expenses.

These are the things that you really can’t go without. I’m talking about food, shelter, transportation, and even things like debt payments and insurance.

Here are some suggestions to help reduce your fixed expenses:

  • Sell your second car – Your household may no longer need two vehicles, getting rid of one vehicle will reduce your costs for petrol, maintenance and auto insurance.

  • Be more energy efficient – Reduce your expenses and help the environment at the same time. By installing solar panels, automatic lights and smart thermostats, which will help to minimise your energy costs throughout retirement.

  • Shop around for lower cost services – Many people just stick with their current providers because it’s too much hassle to change. But it could save you hundreds or even thousands by shopping around for less expensive utilities, mobile and internet providers.

  • Ensure you use your senior discount – Both Seniors Card and Senior Savers Card open up a world of special offers – from local shopping and dining, to travel, entertainment and events, professional, personal, health, home, auto or financial services, and heaps more. 

  • Ensure you’re aware of any potential Centrelink entitlements – check out Moneysmart and government services payments for older Australians for further information.

  • Evaluate your insurance policies – Stay on top of your personal insurances and negotiate with your provider to get yourself the best deal. Increased market competition means most health funds are willing to negotiate with their clients.

  • Pay off your mortgage ASAP – Housing is among the biggest expense retirees face. Eliminating your mortgage will remove a sizeable monthly expense, although you will still have maintenances costs for your home, but it likely to cost significantly less than your mortgage repayment.

Make healthier choices

It’s vital that you look after yourself before and during retirement, as being sick is not only miserable, but also can be very expensive. Many chronic health diseases are preventable.

Eating healthy will help to prevent heart diseases, type 2 diabetes, and other chronic diseases. A balanced diet of fruits, veggies, whole grains, lean meats, and low-fat dairy products is important at any age.

Regular exercise is vital to prevent, delay, or manage chronic diseases. Aiming for moderate physical activity (brisk walking or gardening) for at least 30 minutes a day.

Consider downsizing your home

Downsizing your home is a great option to get rid of debt. Moving into a less expensive home can significantly reduce your retirement expenses.

Like all major financial decisions, a move to downsizing your home to reduce debt needs to be carefully considered.

We’ve compiled the pros and cons to downsizing:

Pros

  • Increased cash flow — Downsizing could free up money to pay off your mortgage, invest or spend.

  • Easier to maintain — A smaller place takes less effort to clean and maintain.

  • More convenient — You can choose a layout and fittings that better meet your needs, or a location closer to family, transport, and services.

  • Lower insurance and utility bills — In general, a smaller home costs less to insure and is cheaper to heat or cool.

Cons

  • Less space — A smaller place means less space for things, so you may have to make some hard choices.

  • Less flexibility — Your new place may have less privacy, fewer guest rooms, or less space for entertaining.

  • New neighbourhood — It may take time to get used to new surroundings.

  • Emotional connection — Your family home may be full of memories, which can make it difficult to let go.

Consider working longer

If you are willing to work a little bit longer, even just an extra year can greatly increase your standard of living for the rest of your life. By working a longer, you can add more to your superannuation and increasing your super contributions will go a long way to ensure you retirement nest egg will last the distance in your retirement.

You may be concerned about running out of money in retirement or you may think you’ll be right.

But it’s vital you have a financial plan in place to ensure you and your loved one are set financially for the rest of your lives.

Why not contact Oracle to discuss how we can help you plan to retirement and ensure your money lasts for the duration of your retirement.

Important information – Oracle Advisory Group makes no representation or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. The information in this document is general information only and is not based on the objectives, financial situation or needs of any particular investor. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek their own professional advice. Past performance is not a reliable indicator of future performance. The information provided in the document is current as the time of publication.
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