Biggest retirement planning mistakes and how to avoid them

Retirement planning in Australia can be a confusing and complicated process. There’s a lot you need to think about to make sure you’re best placed to achieve your desired retirement lifestyle. To help make things easier, we’ve created a list of the most common retirement planning mistakes – and how you can avoid them.

Top retirement planning mistakes in Australia

Here’s our list of 10 of the most common errors and how you can avoid making them.

    1. Not having realistic and personalised retirement objectives

The mistake: Not developing a clear strategy based on a realistic goal to achieve your desired retirement income. 

How to avoid it: The best way to begin is to define your retirement goals and desired lifestyle clearly, then create an overall plan to meet those objectives. It's also a good idea to start your plan as early as possible to give yourself enough time to plan (and save) for your dream retirement.

Use our Retirement Lifestyle calculator to work out what income you’ll need in retirement.

    2. Not keeping your retirement plan up to date

The mistake: Not updating your retirement plans when your circumstances change.

How to avoid it: Regularly review and update your retirement plan, ideally every year or whenever you experience a significant life event (e.g. change of employment, inheritance, increased healthcare needs, shifts in financial markets, super fund underperformance, etc.).

    3. Forgetting to apply for concession cards

The mistake: Many retirement-age Australians are eligible for concession cards but do not apply. This type of support should not be underestimated, as it can significantly reduce your expenses.

How to avoid it: If eligible, you can apply for concession cards such as the Commonwealth Seniors Health Card, which offers discounts on medical expenses, utilities, transportation, etc. For more information, visit Services Australia.

    4. Withdrawing all your superannuation at once

The mistake: Withdrawing all your superannuation as a lump sum once you retire. 

How to avoid it: If you withdraw all your superannuation at retirement, it means it doesn’t stay invested. Your super can stay invested even after you retire, and you can adjust your investment options to match your risk tolerance. You can learn more about our retirement income products..

    5. Not considering healthcare in retirement

The mistake: Not considering increased healthcare costs as you age.

How to avoid it: As you get older, it’s likely you will need to spend more money on healthcare support. When considering how much you might need to pay for health services, you should keep in mind support services such as the Commonwealth Seniors Health Card. You can find out more about the support available at the Services Australia website.

    6. Not considering living costs (the impact of inflation)

The mistake: Underestimating how your day-to-day living expenses such as housing, utilities, groceries, etc can increase with inflation. Don’t forget that inflation has the power to reduce your purchasing power. 

How to avoid it: Calculate your living costs and budget your expenses accurately. Our Retirement Lifestyle calculator takes into account inflation and can help you work out what your costs will be.

    7. Longevity can affect your savings

The mistake: Underestimating how long your retirement funds need to last. Life expectancy has increased in Australia, and this fact can be overlooked when it comes to organising your retirement. 

How to avoid it: Plan for at least 20-30 years of retirement. As mentioned above, consider rising healthcare costs, living expenses, etc.

Use our Retirement Drawdown calculator to work out how long your super will last.

    8. Not reviewing your investments

The mistake: Not reviewing your investments as you approach retirement and making sure you have a balance of risk vs growth potential that you’re comfortable with,

How to avoid it: As you approach and enter retirement, you may want to focus on investments that are less likely to fluctuate and place more of an emphasis on more stable assets. It’s a good idea to talk this through with a financial planner to make sure your investments are a good fit with your retirement goals.

    9. Not considering tax implications in retirement

The mistake: Not considering the tax implications of how your super is invested after you retire.

How to avoid it: If you are fully retired and keep your super invested in a Retirement Income account any investment earnings will be tax free. However, if you withdraw super as a lump sum and invest it elsewhere, tax will apply to those investment earnings. As always, it’s worth chatting to a financial planner about this.

    10. Not considering the Age Pension when estimating your retirement income

The mistake: Not considering how Age Pension payments could supplement your income in retirement.

How to avoid it: If you are eligible for Age Pension payments, you can combine it with withdrawals from your super to reach your desired income amount. Use our Retirement Drawdown calculator to see how this can work.

Finally, our biggest recommendation: Speak to a financial planner

To help avoid common retirement planning mistakes and to make sure you are best placed for the retirement you want, it’s always a good idea to talk things through with a financial planner.