Financial wellbeing in retirement

Eight secrets to ensure your golden years are as golden as you deserve

Despite financial wellbeing in retirement being essential, you’ll still frequently see some concerning headlines about funding retirement or retirement planning. For those of you who’ll retire soon, or have just retired, read on for eight secrets to ensure your golden years are free from financial worry – and can become the best years of your life.

If you’re still some way from retiring, you may be more interested in the five ways to increase your wealth.

1. Set aside your emergency savings account

An easily accessible pool of savings will ensure you can weather the storms we’re all sure to face in life. This could be to meet unexpected expenses such as car or home maintenance, for an excess if you’re claiming on an insurance policy, or to travel at short notice if someone dear to you fell ill.

Financial wellbeing in retirement - downsize your home

2. Consider downsizing your home sooner rather than later

Most people will have downsized by the time they reach the later stages of their retirement. This is because of the high expenses, the maintenance burden, and the difficulty of getting around a large property. Downsizing not only frees up wealth that is held in a valuable asset (your own home), but it also increases available cashflow as a raft of expenses are reduced. This includes reduced expenses for rates, maintenance, power, and insurance.

It can pay to ask yourself: why not enjoy the benefits of downsizing sooner rather than later? This can offer you a range of benefits, including:

  • Shedding many expenses tied to a large home, which will increase the amount you'll be able to spend on other activities in retirement,
  • Enabling you to invest any sum you free up from selling your home and buying a more modest property. This investment can provide you more retirement income, so you can enjoy your retirement even more,
  • Enabling you to move anywhere you please, such as near family or the beach, and
  • Freeing up a lot of time you would’ve otherwise spent on upkeep if you move to a lower maintenance property.

3. Make a retirement budget

If you haven’t retired yet, spend some time analysing your retirement expenses. Working through a before and after retirement budget is important, as the estimate of what you spend after retirement will help you understand your income needs. When doing this, take extra care when estimating expenses such as increased travel, hobbies, and healthcare costs, as this is one of the biggest retirement budgeting mistakes people make. Another issue is steadily rising costs because of inflation.

financial wellbeing in retirement - health

4. Make your health a priority

It doesn’t matter how wealthy you are if you have poor health. This means staying active, eating right, and ensuring you have appropriate health insurance in place. If you decide not to establish health insurance, then ensure you have a plan to self-insure.

With health insurance, if you get in early, your premium level (payments you make for the cover) can be affordable and provide a safety net for later. If you leave it too late, the premiums can become excessive and force you to self-insure.

5. Don’t worry about the past

If finances were tight during the last decade, or you’ve suffered through health issues or other setbacks, you may feel that you haven’t set much aside for retirement. This may lead to anxiety about the lost years. If this is the case, rather than dwelling on the past, focus on what you can do going forward and where you want to be.

If you haven’t talked to your significant other or a trusted friend about retirement, you’re probably missing out on a chance to alleviate your concerns. After speaking about it, you’ll usually be able to more logically think through the next steps.

6. Understand potential risks and take steps to protect your assets

If you die without a will, the law says who is entitled to share in the estate. For example, our financial advisers frequently encounter situations such as:

  • Retired or retiring couples with children who aren’t aware that if one of them dies without a will, the spouse will only receive the personal chattels plus $155,000 (with interest) and a third of anything that’s left. Everything else held in the name of the deceased is divided among the children. If any of the children have passed away, their children receive their share, and so on for each generation.
  • Individuals, such as widows or widowers without children who aren’t aware that if they die without a will, everything they own will become the property of the Government!

To learn more about this, you can get in touch with us, or conduct some of your own research into what happens if someone dies without a will.

Not only that, but have you considered what will happen if you become injured or mentally incapacitated, such as through illness or an accident? This is what an enduring power of attorney is for.

Spending some time understanding the risks you face, and planning for them, can offer you peace of mind knowing that your loved ones will be taken care of if you’re incapacitated or when you pass away.

Financial security in retirement - beach

7. Learn about the best investments for retirees

Many people carry investments into retirement that were very worthwhile to accumulate wealth with (such as residential investment property, which has enjoyed solid results in some New Zealand regions over recent years). However, such investments are not always suitable for providing a retirement income and helping people to enjoy the wealth they’ve worked hard to create. Many people we come across also have a motley collection of investments, including multiple KiwiSaver and superannuation schemes, which are held without an overall strategy or plan in mind.

To resolve this, you’ll need to research the various types of retirement investments available. As each different investment comes with advantages and disadvantages, it’s often best to have different investments complement one an other. One such investment that’s very common overseas, and has now been available in New Zealand for several years is an annuity, which pays a lifelong stream of guaranteed retirement income.

Financial wellbeing in retirement - holiday

8. Develop a retirement plan

Everyone’s retirement goal (or goals) varies depending on personal circumstances and lifestyle. Regardless of your goals or circumstances, a good plan today can help lay the foundation for improving both your current and future wellbeing. But not everyone knows how all the pieces of their financial life fit together, particularly as things change and you need to rethink your plans. As Walt Disney (a man who went from bankruptcy to immense wealth) once said, “…times and conditions change so rapidly that we must keep our aim constantly focused on the future.”

Ask yourself:

  • Have you tried an online retirement calculator? This helps you see how long your money will last. You can use different inputs such as a different retirement date, ​the rate of return, and see how these things may affect your retirement income.
  • Have you created a retirement plan and agreed on it with your spouse so you have a consistent approach to follow throughout retirement? An investment plan is like a job description. Once you know the job you need your funds to do for you it becomes easier to make the right hire (in this case, select the most appropriate investments).
  • Have you sought the sounding board of a professional financial adviser, experienced in retirement planning, to review your retirement plan? Our advisers can do this for a flat rate, and if needed can manage your retirement investments and help with financial planning decisions on an ongoing basis. Getting a second opinion at such a major time of your life is well worth it, and even if you’re not sure, you can still reach out to us for an initial free and no obligation consultation.

Often, we’ll come across people who have saved far too much and are now too late in their retirement to properly enjoy their wealth. Sometimes, retirees take a large portion of their wealth to the grave, and while there are no ‘right and wrong’ answers, it probably would’ve made a lot more sense to have either passed it on to the next generation while they were still alive, spent more (such as on travel or living a more lavish lifestyle), or given more to charities, church, or community. When large sums are taken to the grave, often the lawyers and executors of the will are the most pleased, as they frequently charge significant fees – especially if the will is challenged which can take years to resolve. This is where a detailed retirement plan can ward off such issues.

Financial wellbeing in your retirement – the bottom line

Taking care of your personal financial wellbeing can be as important to your overall wellbeing as a roof over your head, nurturing your social connections, and maintaining your physical and mental health. The top eight secrets to ensure your financial wellbeing in retirement include:

  1. Set aside your emergency savings account
  2. Consider downsizing your home sooner rather than later
  3. Make a retirement budget
  4. Don’t worry about the past
  5. Make your health a priority
  6. Understand potential risks and take steps to protect your assets
  7. Learn about the best investments for retirees
  8. Develop a retirement plan

While approaching your finances in this way can be complex and a little daunting, a good adviser can help you identify the key issues and work out how to effectively address them. Ultimately, getting good advice can help you gain more financial confidence. While it may not happen overnight, the right approach and partnering with a trusted professional may be the key to managing your financial wellbeing, so please reach out to us if you’d like to arrange an initial no obligation and free consolation.