The term ‘retirement’ is often synonymous with lavish holidays, fancy sports cars, and hours spent outdoors doing the gardening. And while gardening is a great way to pass the time during retirement, it turns out that spending all your savings on the trips and cars you told yourself you would might not be the best way to spend your retirement funds.
We hate to break this to you, too, but there are also a range of spending habits to avoid during retirement. Choices that you might not think twice about until you start feeling the repercussions of them. So here are our top 5 financial mistakes to avoid in retirement.
1. Be weary of scammers
Familiarise yourself with the look, feel and language of important emails. Does your bank regularly email you? What do their emails usually say? Do they warn you about questions they’ll never ask, or links they’ll never send you? Unfortunately there are heaps of scammers out there at the moment, pretending to be anyone from your bank manager to the phone company to the chairperson of QANTAS. Knowing who you regularly receive emails from, and what those emails generally entail is important in ensuring you’ll recognise a scam email as soon as it hits your inbox.
And if you’re ever unsure of an email or phone call – don’t click on any links or share any personal details (like your date of birth, address, passport number or bank details). Call the business or organisation instead and confirm with them directly. There’s no such thing as being ‘too safe’ or ‘too careful’ when it comes to scammers.
2. Avoid get-rich-quick schemes
They’re tempting, we know, especially now that you’re no longer receiving your fortnightly salary. But be careful with these – there’s no such thing as ‘easy money’, even if it seems that way. Do your research, ask all the right questions, and sense-check with your loved ones. This is often the perfect time to get in touch with a child or grandchild. The younger generation have weird and wonderful ways of just ‘knowing’ when these schemes don’t feel right, and they can help you do the research before you commit to anything.
3. Try not to spend all your savings on your family
While you might have the funds to help your daughter buy her first investment property or some extra cash to help your son buy his dream car, it might be worth pausing and reconsidering. Once you start sharing your funds with your family, they may regularly expect a contribution from you, eating away at your retirement savings (and ultimately, their inheritance). Be careful with what you say yes to, and try not to make snap decisions to help them out. Of course your desire to support them comes from a good place, but you might suffer long term because of it.
4. Don’t spend as though you’re still working
Sure, you can spend those juicy savings on exciting holidays, holiday homes, cars or fancy appliances, but it’s important to remember that your income might no longer be what it once was. Unexpected costs always arise, so spending as though you’re still working might not be the most responsible way to manage your money.
5. Expensive luxury holidays sound great and all, but do you really need them?
The answer is no, you probably don’t. Many retirees opt to spend their retirement years travelling the globe and exploring every exotic country in existence. And while this sounds lovely (we all wish we could live like that), travelling can be extremely expensive and can prompt you to chew through your retirement funds in no time. Why not opt for a local staycation instead? Or day trips to beaches you’ve never visited before? There are so many alternatives to expense vacations – get creative!
Bonus Tip: Avoid Inflation
Without an increasing salary, it can be challenging to meet the rising cost of living in retirement. One way to avoid inflation is to look at your estate plan, and consider your final disposition. It mightn't be the most exciting decision you'll make but it's certain to be a responsible and loving one. Prepaying for your cremation allows you to locking in today's price, and also means your family will escape the stress and pressure of making decisions in a hurry, when the time does eventually come.
Retirement is a wonderful time for you and your loved ones. You finally have more time to spend with your favourite people, doing your favourite things. Chances are you’ve saved funds and have your superannuation to dip into, too. Creating spreadsheets to manage your retirement funds and spending habits can be a great way to keep track of your money. It might also be worth chatting to a financial advisor if you have specific questions, or are keen on creating a responsible and detailed financial plan. Remember, this time is supposed to be a relaxing and special one – and keeping your finances in check is a great way to ensure it stays exactly that way.
If you'd like to speak with one of Willed's dedicated funeral arrangers about prepaying your cremation, please call 1300 945 533.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.