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Retirement planning mistakes & suggestions:-

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Retirement planning mistakes & suggestions:-

Old 09-08-12, 04:45 AM
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009jim
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Retirement planning mistakes & suggestions:-

I realize someone will suggest I should post this query in a forum for retirement, but frankly I think I'm more likely to get unbiased practical help right here.

Anyway the query is directed to folks who are already retired or close to, and now realize there are things they should have done, or should not have done, so they would be in a better situation. Reason for asking is that I am over 55 and wondering what I should be doing. I guess the key thing is finances, but health and other things are also of interest. The future is of course uncertain so changes to the global/local economy can negate something that might seem like a good plan. Nonetheless I'm interested in your ideas and comments.
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Old 09-08-12, 07:57 AM
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People have different viewpoints as to what financial measures to take, but here are some undisputed things to do leading up to retirement:
No credit card debt. Period.
Health care is taken care of (insurance, money set aside if self-insuring etc)
You know what your monthly/yearly expenses are. It's crazy to retire early unless you know the specific expenses you pay every year. Having a "general idea" isn't close to good enough, unless you're so wealthy it doesn't matter.
You know what your NET retirement income is. Presuming this number is less than your expenses, from where will you draw funds to make up the shortfall?
You'll need a contingency fund for large expenses - major home repair, replacement car, etc.

Some people believe you should carry a mortgage, but I strongly disagree.

I suggest you check out www.bogleheads.org/ and www.early-retirement.org
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Old 09-08-12, 03:01 PM
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Rowan
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The biggest issue for us Australian baby boomers is that the compulsory superannuation system has put us well and truly behind the eight-ball. There is still a government-funded pension system in place, and for many, the fortnightly payments would have meant a comfortable enough living had the real value been maintain instead of eroded by successive governments.

But the introduction of compulsory superannuation contributions by employers as part of the wages/salary packaging was introduce about, oh, 20 years ago. That has meant for many, that there is a 20-year gap in those savings, and anyone retiring now is not really going to have enough money to invest and draw down the interest each year to live on.

Then there is that interest rate factor. It used to be that banks were safe destinations for retirement investment, because the interest rates were reasonable. But that became all effed up when banking controls here were dispensed with, and now banks are offering rates severely below those that it charges its mortgage and other borrowing clients. The lending rates go up and down at will, but in effect, investment interest has declined.

That has meant retirees have had to go to self-management with riskier investments, or put their funds into the hands of advisers who make fists full of money from commissions. If the investments go bad, as has happened and it's looming more now as a serious issue as the Chinese economy starts to falter severely, the poor old retiree is left with reduced capital and income, while the adviser gets off scot free.

Personally, I have little faith in the superannuation system. It takes only a GFC to erode the value immensely, and I think many are still trying to recover from that 2008-2009 debacle.

I will probably keep working until I drop dead, which is what John Howard proposed,. The current Fed Government has picked up on that and will raise/has raised the retirement the age to 67 anyway.

If you are fortunate enough to retire with a million or more, invest wisely, but think about planning your retirement away from financial things, too. Keep up your education in the job you had, for instance, so that you can take on various gigs if you need the added income.

Make sure your wife can stand having you around for any length of time in the house. Otherwise, do more riding and find other interests that would take the same amount of time as you would have spent at work, at least in the initial period.

Part-time work in your original field, or developing skills in another, or just plain volunteering or mentoring are some other options that might keep you active mentally and physically.

There's some paperwork stuff that you might need to bring up to scratch. A will, powers of attorney and so on. Get a physical every year, with emphasis on the ticker and blood sugars and cholesterol. Think about whether you need the house you live in now, or are you an empty nester? If the latter, is it feasible to sell and downsize -- although being aware that to buy elsewhere might cost more.

This, however, is fraught with some danger, too. If you have a wide circle of friends, can you do without seeing them for long periods? Do you have an attachment to culture, the arts or particular sports teams or clubs?

I know of numerous examples of people moving to my home state of Tasmania from the mainland after retiring, because the property values were comparatively cheap compared with Victoria or NSW. But they ended up moving back to the mainland after several years, often at a financial loss on the sale of their Tasmanian home, and on the purchase of a new property in their home state because property values had gone up.

They moved back because of the island mentality -- closed mindedness of the true locals, lack of entertainment and cultural opportunities, the cold winters, the moderately warm summers, and maybe even job opportunities when they were needed.

In some ways, it's good they move away, because they arrived with the intention of introducing the stuff they wanted to leave behind, and thus spoil what really is a nice lifestyle.

Anyway, Lenny over in the 50+ forums has been discussing the same thing, so it might be worth looking that thread, too.

Last edited by Rowan; 09-08-12 at 03:10 PM.
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Old 09-08-12, 06:14 PM
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The biggest problem with the compulsory superannuation concept as I see it, is that inflation completely invalidates the concept for most people. In simple terms, if I want to buy a loaf of bread the day I retire, it will probably cost ten times what it costs now.
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Old 09-08-12, 11:48 PM
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People have different viewpoints as to what financial measures to take, but here are some undisputed things to do leading up to retirement:
No credit card debt. Period.
Health care is taken care of (insurance, money set aside if self-insuring etc)
You know what your monthly/yearly expenses are. It's crazy to retire early unless you know the specific expenses you pay every year. Having a "general idea" isn't close to good enough, unless you're so wealthy it doesn't matter.
You know what your NET retirement income is. Presuming this number is less than your expenses, from where will you draw funds to make up the shortfall?
You'll need a contingency fund for large expenses - major home repair, replacement car, etc.

Some people believe you should carry a mortgage, but I strongly disagree.

I suggest you check out www.bogleheads.org/ and www.early-retirement.org
Excellent advice here. Looking at the bigger picture, you need to have a pretty good concept of what you want your retirement to be like before you can make plans and estimate your expenses. Questions like these need to be considered:

-Do you want to stay in your current location, or move to another one?
-Are there any current or possible future dependents (children, parents, etc.) that you will have to be responsible for in retirement?
-What sort of lifestyle would you like to have? Could you afford it, or do you need to revise it to meet financial realities?
-Does your spouse or partner agree to your concept of retirement? If not, what compromises are each of you willing to make?

Lessons from my own retirement:

-If you're fortunate to be working for a large employer that offers retirement counseling for employees, use it!

-Don't try to relocate too soon after your retirement date. I left myself all of a week and regretted it- there wasn't enough time to say goodbye gracefully to co-workers and friends who wanted visits for one last dinner, etc.

-Don't imagine things will be peaceful end of work- I thought I'd be sort of coasting by then, but the reality was my last few weeks were hell with trying to get everything finished up. I was actually off the payroll by the time I could clean out my office. My employer was Ok with that, but some might not be.

In any case, you're about to embark upon quite an adventure- with careful planning and a clear set of objectives for your retirement it can be a really positive life change.

Best of luck!

Last edited by rnorris; 09-09-12 at 12:14 AM.
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Old 09-09-12, 03:48 AM
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Well it's hopefully at least 10 years away yet for me but a couple of things I've pondered:-
[1] Should I get a granny flat put on my house so I can rent it to students and get income, or should I keep my cash in stocks and expect capital growth and income from those to give me more flexibility?
[2] Should I keep my zippy little economical sedan that costs $700 for a service, or trade it for a pickup with diesel or LP gas that will cost less to run and maintain but be difficult to park?
[3] Should I move to Thailand because a friend told me I could live there for a lot less and afford to pay people to do chores? But, I'd have no friends, except for presumably having a "girlfriend"!
[4] Should I move to America and travel around in an RV? That'd be awesome, but could be lonely.

The problem is that I think of things that might be relevant and then I forget them and never change anything.
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Old 09-09-12, 08:53 AM
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You know, many people look forward to their retirement so the first thing they can do is take a big trip somewhere, maybe even around the world.

I sat next to a couple on a flight to North America last year, and they were like deer in headlights. He had just retired as a dairy farmer, and this was their first ever trip overseas. I think they were overawed just by being on the plane (I think it was the big new Qantas Airbus).

I don't know if you have travelled, but my suggestion is to do it before you retire. Travel as much as you can during your annual leave over the next 10 years. Mix your cycling or any other interests you have into it.

I am about your age, and I am making sure we get as much travelling in as we can.

As to your point-by-point suggestions:

1) Yes go the granny flat. There will always be students if you live near a university. That means always having an income, plus it will add capital worth to your home if you get all the right local government planning and building approvals. I also think, however, any financial adviser would suggest you spread your risk, so it wouldn't be wise to puts a huge amount of money into the granny flat when other paper investments might be more worthwhile.

2) It depends what you will use the pick-up/ute for. And what sort? If the ute will be more practical in moving stuff around, and there will only be your wife, then why not? I always like the idea of crew-cabs with four proper seats. The Rodeo/Colorado always appealed when I drove them compared with the Toyotas -- better torque with the diesels for a start. You could probably pick up a good ex-government one at auction, if you're game.

3) This is interesting because you're already acclimatised to the heat and humidity, and if you are drawing down a pension as well as getting super income, then you can, I understand, live like a king. It's certainly considering, especially in the context of what I said in (1).

4) You are restricted by a three-month tourist visa for the US, which I suppose can be negotiated. The tourist visa for Canada is six months. Don't know about Mexico. Moving to the US is not as simple as it appears on the surface -- Machka's brother married an American, and still had to be extremely patient, getting the right job. Simply the Americans aren't as free and easy about immigration as the Australians. And it's not really much better for Canada. I know. I've tried.

You can, however, pick up a used RV for much less than you pay for the equivalent in Australia.
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