R etirement should be a time of enjoyment and relaxation, a reward for decades of hard work. However, for many retirees, it’s overshadowed by a looming concern: the Fear of Running Out (FORO) of money. In a country where life expectancy is high and the cost of living continues to rise, this fear is not unfounded. But it’s not insurmountable. Let’s explore how to effectively tackle FORO.
Understanding FORO: What It Is and Why It Matters
FORO is particularly acute in Australia due to specific factors such as the volatility of superannuation funds, rising healthcare costs, and the uncertainty surrounding government benefits like the Age Pension. It’s the anxiety that your retirement savings may not last as long as you need them to, potentially leading to a compromised lifestyle in your later years.
Assessing Your Financial Situation
The first step in conquering FORO is to take a hard look at your finances:
- Superannuation and Other Savings: How much do you have in your super? Are there other savings or investments you can rely on?
- Expenses: What will your retirement expenses look like? Include regular living costs, healthcare, hobbies, and travel.
- Government Benefits: Understand what benefits you are eligible for, including the Age Pension and how it integrates with your other income sources.
Strategies to Alleviate FORO
- Undertake Financial Modelling
Financial modelling is a crucial tool for evaluating how feasible your desired retirement lifestyle is within your financial means.This process not only aids in making more informed financial decisions but also aims to provide clarity and confidence in your retirement planning.Through financial modelling, potential strategies are identified to ensure your resources align with your goals, ultimately helping to dispel FORO of money. This step is integral in transitioning from uncertainty to a secure, well-planned financial future.
- Eliminating Budgeting Stress and Complexity
In our journey to conquer FORO of money in retirement, it’s essential to have a robust plan for managing your finances.That’s where our specialised solution, the CashFlow Optimiser System, comes into play. We recommend that you use the CashFlow Optimiser System to implement the findings of financial modelling to ensure that you are paid a regular “income” equal to your desired lifestyle or the lifestyle as determined by the financial modelling.The CashFlow Optimiser System is specifically designed to streamline your financial management. This system eliminates the typical stress and complexity associated with budgeting, especially in your retirement years.
- Investment Strategy Adjustments
Review your investment strategy to ensure that it is matched according to both your risk profile and risk capacity.This is important because it then helps determine the expected return from your portfolio over time which is used in the financial modelling to then determine the affordability of your desired lifestyle.For example, someone with a low tolerance and/or capacity for risk may need to accept spending less money as opposed to someone who has a higher tolerance and/or capacity for risk.
Using a psychometric risk profiling tool is the recommended way to determine the correct settings for your portfolio.
- Working in Retirement
Consider part-time or casual work. This can provide not only additional income but also social engagement and a sense of purpose.
- Downsizing Your Home
If appropriate, downsizing can free up equity from your home, reduce living expenses, and provide a more manageable living space.
- Healthcare Planning
Investigate private health insurance options to supplement Medicare. Understand what your policy covers and consider additional coverage for age-related health issues.
- Emergency Savings
Maintain an emergency fund for unexpected expenses. This helps avoid the need to withdraw from your investments unexpectedly.
- Professional Financial Advice
Engage with a financial adviser who understands retirement planning. At Andrew Rowan Wealth Management, our experience financial planners can provide tailored advice, particularly regarding superannuation and tax implications.
Final Thoughts: Embracing Flexibility and Adaptability
Think of successful retirement planning as assembling a complex jigsaw puzzle. It requires fitting together all the essential pieces – financial assessment, investment strategy, healthcare planning, and more – to complete the overall picture. Just like a puzzle, every piece is vital to see the full image of a secure, financially stable retirement.
Retirement planning is not a ‘set and forget’ process. Regularly review your financial plan, adapting to changes in your personal circumstances, market conditions, and government policies.
FORO is a natural concern, but it doesn’t have to overshadow your retirement years. With careful planning, informed decision-making, and a willingness to adapt, you can secure a financially comfortable retirement. Enjoy this well-earned phase of life with confidence, knowing that you’ve taken the right steps to manage your financial future.
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Disclaimer: This article provides general information and does not constitute financial advice. It’s always best to consult with a qualified financial planner or advisor to understand your unique circumstances and needs.