Will I have enough to retire and other issues weighing on pre-retirees

Inflation, rising home loan interest rates, property prices and a housing crisis, which for some pre-retirees means their adult children will not be leaving home anytime soon, market volatility and an answer to the question "Will I have enough to retire?" are among the concerns weighing heavily on pre-retirees.

There’s a lot to consider and in this article, I cover some of the issues my pre-retiree clients commonly ask me about.

Will I have enough?
Australia’s leading superannuation association (ASFA) developed a retirement Standard that provides a breakdown of expenses necessary for couples and individuals to live a comfortable or modest lifestyle in retirement. 

The Standard indicates a couple would need $68,014 each year (from age 67) for a ‘comfortable’ retired lifestyle, while couples who are happy with a modest lifestyle will need $44,034 per year.

In dollar terms a comfortable retirement for a couple would require $640,000 in savings, while an individual would require $545,000.

The ASFA’s Standard provides a benchmark which can be helpful, but the obvious grey area is what’s the definition of comfortable? And, do you really want to hang around at work until you’re 67?

In my experience, everyone is different and a well-considered financial plan can shore up when you can pull the retirement lever and feel confident in the knowledge that you have the savings, investments and income streams necessary to live your retirement life, your way.

Adult children and housing affordability
The very high cost of living, tight rental market, rising interest rates and very high property prices are providing plenty of cause for concern. While my clients are generally confident about their own circumstances, many are worrying about their adult kids.

Naturally, many pre-retirees (and retirees) want to help their offspring. However, for some pre-retirees, providing financial support can impact their own retirement plans (sometimes delaying it for years) or they can find themselves financially compromised and living a modest retirement lifestyle when they’d worked hard to enjoy greater retirement comfort. In some circumstances, it can lead to family estrangement and financial hardship for all involved.

Financial support can take different forms. Helping out with childcare for grandchildren, having the entire family move in with you and of course, handing over cash to pay bills or furnish a deposit on their own home, thanks to the ‘Bank of Mum and Dad’!

For well-funded retirees, providing a living legacy can also be an option. This involves paying your intended inheritance money (or part of it) to your adult child beneficiary while you are still alive.

Providing money to family members, requires careful consideration as there can be tax and other financial impacts that could affect you as the giver, and them as receiver. Importantly, there needs to be a clear understanding of the limits and conditions of your financial support.

For example, say you decided to give a large amount of cash to an adult child and their spouse for the purpose of paying the deposit on a home. This should be legally documented, even if you have no loan repayment expectation. Unexpected things can happen including a relationship break down. Without a legal document outlining the conditions of the loan which could include formally registering you as a creditor on the mortgage, you’ll have no claim on that money.

Instead, your money will likely be included in their joint marital assets and split between the two, with the ex-spouse under no obligation to return their share of that money to you.

Share market volatility
Volatility and the share market go hand in glove. It’s for this reason, carefully planned and diversified investment strategies are prepared in accordance with each individual’s risk profile and stage of life.

Unadvised investors, often lack the knowledge and financial confidence to ride the volatility rollercoaster, often attempting to ‘time’ the market in the hope they’ll sell at a price peak or buy at rock bottom. The result is usually missed opportunities, unnecessary stress and financial loss.

When it comes to managing volatility, strategies including dollar cost averaging, which involves buying or selling in increments rather than in lump sums, can ride the wave of highs and lows to create a better overall, long-term outcome.  However, the key is to get advice specific to your individual circumstances.

Personal Risk Insurance
Heart attack, stroke and cancer are among the serious illnesses that represent major life events causing significant financial impacts on individuals, your family and legacy.

However, it’s also important to encourage adult children to insure themselves as serious illness, accident or loss of income can impact your retirement plans if you suddenly need to take on the role of carer and provide financial support for them and/or their family.

At Moiler Wealth, I provide qualified advice for pre-retirees to clear lingering debt, boosting superannuation and retirement savings and establishing passive income streams for funding your lifestyle beyond work.

I apply a 7-step Early Retirement Framework, which as the name suggests, provides a methodology for using wealth opportunities for retiring early or at a time that’s right for you.

This approach is linked to my personal mantra that suggests if you can afford to work less, you probably should and make financial decisions that will allow you to spend more time doing what you want to do with those you love. Ultimately, it’s about financial planning to ‘live life, your way’.

If you’d like to know more, please contact me.

Moiler Wealth helps high net wealth individuals and family groups, professionals, business owners and pre-retirees to live life, your way!

Learn more about Adam here.

This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

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