31 ways to improve your retirement planning – Part 1

It is always a great idea to commence a new year on a positive note. As I said in my previous post: Proposed changes in 2022, I really want all of us to have this New Year 2022 one of the best years ever, financially, emotionally, spiritually and physically, but all those components work together.

I know from experience that if my finance are not in order, and if I feel financially drained and insecure, there is no way I will feel emotionally happy, fulfilled and satisfied. So whether we like it or not, money plays a big part in our lives and in our wellbeing, not to mention our choices and abilities to do something good and positive in this world.

So, as I said, I really want to start this New 2022 Year on a positive note and what is better than going over steps how you can improve your retirement planning or any financial planning for that matter.

Originally this video started with 9 steps, but once I started thinking about it, all those ideas and suggestions came rushing through my head and I thought, what a great way to slowly improve step by step your planning system.

Some of the ideas listed, I have already covered in parts in my previous videos, posts or articles, so I will link them all for you, others might be a short information, but some could be a totally new idea for a completely new video or another article.

So today our topic is: “31 ways how you can improve your retirement planning”, or as I said before, any financial planning, regardless of your stage of life. As the number has grown from 9 to 31, I will divide this list between two sections, not to make this one too long, so please return next week for Part 2.

1. Save enough – have a plan for the future with a defined strategy 

This is most likely the most important information in your planning, you really have to have a starting point to know what you are striving for, what type of assets and what value you need to accumulate by the time you plan to retire.  

Nothing is set in stone, but you need to make a solid start. And a very good starting point are: “How much do I need to retire” and “What Income is Needed in Retirement”.

2. Understand your longevity and do not underestimate how long you are going to live 

This is most likely the biggest worry for most retirees, with many thinking of ways how to make the money work harder. 

If you believe that at the age of 90 you will need a lower income or lower asset base, think again. Just see: “How long will you live in retirement”.

3. Believe that it is never too late to start planning and saving 

Some might think that once you retired, there is nothing you can do to improve your retirement income and to make your money last longer. This is such an incorrect assumption. 

Unless you have no assets saved at all, your situation can always be improved. I have a whole series of videos related to Age Pension and how you can improve the government benefit or organise your income streams to provide you with a secure income for life. Feel free to binge-watch the whole series of 14 videos devoted to this subject: “Age Pension & Your Retirement” 

4. Make your decision rationally and not based on your emotions 

Money is an emotional topic. We might believe that all our decisions are made rationally and well thought through, but let’s be honest, whatever decision you make, you can always justify it. 

And justification comes from the emotional state of needing to prove to yourself and everyone around, that your decision is wright, even if deep down you know it is not. 

Good planning and sticking to set steps defined in your plan, can help to remove the emotional distress and allow you to make your decision calmer and to your actual financial benefit. 

If you are unable to remove your emotions from your financial decisions, just admit this to yourself and ask for professional assistance to manage your money, organise your plan and check your progress. 

You are always involved in a decision process, but the emotional drama can be taken away and the financial planner can cool down your nerves by removing any uncertainties, by explaining issues, providing information and research that will rationally support the decision. 

That can bring you a great deal of peace of mind while improving your investment portfolio performance.

5. Prioritise your own needs and your own retirement before helping your children to build their wealth. 

I see this all the time, when parents sacrifice their own lifestyle, their own level of savings and assets, in order to help their kids to buy their home faster, to pay off the university loan immediately, to have a fabulous wedding etc. Well, if you have sufficient assets to look after yourself and help your kids, absolutely do it, congratulations, you have done well. But if you do this out of parental love, guilt, obligation, shame, scarcity, or you are being “forced” to do it, because the other parents are paying for the wedding, the other parents are helping with the home deposit and you feel obligated to do the same, well I respectfully disagree.  

You have done your duty as a parent, you have raised your kids to be respectful and responsible member of this society, you have supported them throughout their childhood and as young adults. 

Now it is their turn to take that responsibility and create their own lives and their own mistakes. You are always there to support them, but you need to make sure that you are in position to look after yourself for as long as you are alive, because nobody will come to your rescue. 

So it bothers me when I see parents giving their savings away to kids to help them, only later to end up on Social Security check of Age Pension with little savings left, so they can hardly get by in retirement. 

6. Don’t leave money in the bank

This is one of the most common mistakes people make. If you sold an asset and you park your money in cash as it will be needed for your next purchase, this is what cash if for: short-term holding. Another reason to have funds in the bank in cash is as your “rainy day security account” and emergency funds. But most people who keep majority of their savings in cash in the bank, do this due to fear. 

So we are going back to the previous issue discussed in No 4: decisions need to be made rationally and not based on your emotional state. 

There are so many negatives of keeping too much in cash, that I would need a separate video to go through all those reasons, so we will return to this topic again in the future.

7. Don’t carry debt into retirement, especially high interest debt 

Life is life, sometimes there are reasons why you would still have debts outstanding when retired. When assisting clients, we do try to have all debts paid off before the big day of retirement arrives, but sometimes it is not possible. 

If this is the case, then we try to find other options to assist clients with the level of income, as whatever repayments you need to meet, they will reduce your income dramatically. 

But one of the worse debts you could have in retirement is a credit card debt or any high interest debt, such as personal loans, store loans, all those fast loans facilities advertised constantly on TV that supposedly can be approved within 5 minutes. 

Nothing and I mean nothing is as urgent to buy to even consider those loans, as some carry interest of close to 50%. But most people don’t bother checking the agreement, all they want is that new TV, new phone or another holiday. Just see: “How Banks keep you poor – shocking truth” – you will be blown away by my calculations and my findings. 

8. Don’t retire too early

Early retirement means early spending of your savings, if you do this, then you might run out of money while you are still very healthy and full of energy.

You might not have any savings left to pay for the medical care you could need in your very old age. Please speak with a Financial Planner or Financial Adviser that can assist you to figure out when is the most beneficial to commence your retirement. 

9. Invest well in growth assets

Yes, many people in retirement are far too conservative with their investing, which in most cases comes from fear and lack of understanding of investment choices. 

But a good advice can go a very long way to improve not only your ongoing retirement income, but the value of your assets backing you up for the remainder of your retirement or as your legacy you wish to leave behind for your beneficiaries, either your partner, your children or any other person or organisation you wish to leave your estate to. 

Check: “Investing for Income and Growth in Retirement” that explains the benefits of investing into growth assets, but as this topic has been requested by many, I will create new videos about different forms of investing.

10. Do not chop and change your investment strategy

This is a sure way of constantly losing money, when people are trying to keep changing their investments based on some information heard on a radio or TV, read in the paper, heard from the neighbour. Also, so many are trying to chase last year winners. The whole point of investing is to create a strategy that is correct for you, for your stage in life, for your income needs and not to jump on every new shiny thing you hear or read about.  

Not only you will consistently be losing money on transaction costs, but you will also be overpaying for investments that have already gone up in value.
So you need to create an appropriate strategy for your needs, stick to it but with annual or semi-annual reviews.

11. Do not participate in panic withdrawals

OMG don’t even get me started on this one. This is common knowledge, I am sure every single person listening to me now will agree with me, and yet every year I see the same mistakes being made. 

I meet many people who are telling me how much money they lost during GFC (Global Financial Crisis between 2007 and 2009) or the recent drop in March 2020 due to Covid. Those people blame the economy, the market, but the truth of the matter is, that once the market drops it is too late to sell investments. 

Whoever patiently waited for the market recovery, got their money back and more. It took 2 years after GFC for the market to recover, it took only couple of months after Covid crash. Nobody likes market crashes and volatility, but it is part of investing, and you need to accept it if you want to see any capital growth of your savings. 

If you are a person that panics when markets are uncertain, you really need professional service to help you with your investments and how to deal emotionally with those market changes, and that’s where a good Financial Planner can help. 

12. Don’t try to chase historical performance

I mentioned this already before, do not invest into last year winners, most likely this asset or this fund manager will not be a winner in the following year. 

Markets are alive, they change daily, there are many forces that impact performance of assets in one year and decline in the year after. 

If you keep on trying to switch between last year winners, your transaction costs will skyrocket, and you will keep on paying the highest price to buy into new assets. This is a sure way to be going backwards with the performance of your retirement savings. 

13. Stay away from timing the market

It is not about timing the market, but rather about time in the market that will bring you financial benefit. 

Research shows that those investors that stay invested over long-term in a well-diversified portfolio will be better off than those trying to guess the market and try to benefit from market movements. When we start talking about shares (as promised) I will go much deeper into this.

14. Diversify, diversify, diversify…

Investment diversification is most likely one of the most important aspects of your investing and it will have the biggest impact on your overall asset’s security, meaning investment risk and your portfolio performance. 

Have you read my eBook: “12 Principles of Investing” – if not, I highly recommend for you to download it and read it cover to cover. 

Diversification is most certainly one of those principles and it is well explained, so hopefully it will help you in building your investment portfolio. 

And while you are visiting my website AboutRetirement.com.au to download the eBook, feel free to sign up to my newsletter that will provide you with all the details you need to be always up to date with financial changes that can impact your retirement. 

15. Always include fun in your budget

I want to leave today on a happy note, and I believe that as much as it is very important to be a financially responsible person, we cannot forget that life is meant to be happy, enjoyable with lots of fantastic memories we create over our lifetime, that we can return to when we feel blue or nostalgic. 

So don’t forget to allow in your budget for some fun, whether that is your holiday, subscriptions to things you love doing, such as attending Opera shows, or Theatre, or your hobbies – maybe like me you love photography or coin collection. Or maybe just simply you enjoy going out with your family or friends, so please include some fun in your budget, so you don’t feel guilty spending money there and you don’t have to justify those spendings either.  

If this is in your plan and you’ve calculated you can afford it, go for it and enjoy your life.  

Here there are, the first 15 ways to improve your retirement planning, or financial planning at any stage of your life.

Next week we will continue discussing further 16 ways to improve your financial planning journey.
I wonder if you can come up with few more suggestions yourself.

Retirement is a journey not a destination, so be prepared for the ride 

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement