O'Donnell Kerr Financial Planners
  • 08 March, 2016

Look forward to retirement, but proceed with caution

I recently had the pleasure of telling a group of young people at a workshop the story of Mr and Mrs Mean and their retirement journey.

Well, when I say young, I mean people a lot younger than myself and many years away from their own retirement.

By now you may be asking “who are Mr and Mrs Mean? That’s a strange name!”

And I would answer by explaining that they are your ‘average’ (and by average I mean ‘mean’ – get it?) retiree couple whose retirement journey has been disrupted by a series of life changes that provoke questions, a re-assessment of their lifestyles, and a great deal of stress for them both.

For many – reaching one’s retirement age is meant to be a wonderful milestone.

Many individuals tend to view retirement through ‘rose-coloured glasses’ by focusing on how wonderful their lives will be once they reach that milestone.

I’m not trying to be a wet blanket, or put a dampener on your retirement plans, but retirement – much like your working life – will be full of change and, on occasions, some sadness and stress.

Let us have a quick look at Mr and Mrs Mean’s journey. I can assure you that after working with retirees for a long time their story isn’t an exception to the average Australian’s retirement journey.

When Mr Mean reached his retirement age Mrs Mean was still working, but not yet ready to retire.

So for Mr Mean the first decision he had to face was whether he should continue working until Mrs Mean was ready to retire, and what would be the pros and cons of doing this?

Following a review of their superannuation – Mr and Mrs Mean realised they didn’t have enough to maintain the lifestyle they had wished for during retirement. So – what would be their best solution?

They decided to downsize their home and contribute the extra funds into their superannuation. They had many questions that arose from selecting this strategy – all of which required accurate answers.

As we already know; legislative change is constant, and in this scenario it was certainly a factor.

The legislative changes that effected Mr and Mrs Mean’s journey meant that they lost their age pension and suffered a reduction in their income. This caused not only a change in their future plans, but also a great deal of stress at the time.

After drawing down their assets (in order to maintain their income and lifestyle) Mr and Mrs Mean eventually become eligible to receive the age pension once again. But it wouldn’t be long before another spanner in the works.

Being able to receive the age pension was very important to Mr and Mrs Mean but, as a result of an unexpected death in the family and an accompanying inheritance, it quickly became an additional source of stress.

Unfortunately an inheritance placed Mr and Mrs Mean’s age pension entitlement, one they had worked so hard to achieve, in jeopardy.

Down the track – Mr Mean’s eventual passing caused Mrs Mean, now a widow, to only be eligible for the single age pension rate.

This meant that she was subject to the single pension assets and income testing as well. The reduction of her income, once again, meant another re-assessment of her lifestyle and expenditure.

A few more years passed and Mrs Mean’s health declined to a point when re-locating to a residential aged care facility became a reality. Now – even more decisions lay ahead for Mrs Mean and her children.

Let us get back to that workshop. I was originally telling this story to a group of young people and their reactions ranged from “I don’t want to get old now!” to “how sad”, and “I had no idea it could get that complicated.”

However – the most pleasing outcome of that workshop was that those present came to appreciate the fact that retirement planning is not simply a ‘set and forget’ strategy.

Instead it is an opportunity to work with clients and help them navigate the trials and tribulations ahead. I firmly believe this to be true.

In this post I have intentionally not gone into the specific details of Mr and Mrs Means’ retirement journey – it would take far too long. Maybe another time!

The retirement journey is indeed long, with many highs, and it can also be punctuated by many complex lows.

During the tough times it is essential that you are able to talk to someone who has the knowledge to answer your questions, and provide the best possible guidance.

This is crucial so your own journey does not become a complex disaster.

The Realise Your Dream blogs are written by Peter Kelly and Mark Teale. More information about the authors can be found here

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