Count tallies top retiree mistakes

Cashing out a lump sum payment to live like a king for a day, not bothering to visit a financial planner prior to retiring, and ploughing into investment markets without understanding the associated risks are among the biggest mistakes Australian are making regarding their retirement, according to a new adviser survey.

The survey was conducted in the last few months by Count Financial, which asked their 950-odd financial planners to rank the top 10 retirement mistakes Australians make in relation to their finances.

Not surprisingly, financial planners felt the biggest mistake their clients were making was a failure to see a financial planner earlier. Also making the top 10 were a failure to save enough for retirement, and selling investments when the market falls and buying investments when it peaks.

Not understanding risk associated with investing was the second highest concern, while the third was cashing out eligible termination payments (ETP) “inappropriately”.

“You might get the chance to roll over your ETP when you retire or when you change employment. If you’re given a lump sum to roll over, you need to get proper advice to take into account all the tax issue involved,” said Count chief financial officer Michael Spurr.

In a second leg of the survey, advisers were also asked what their client’s top 10 concerns were regarding their retirement finances. A fear that savings would not last through retirement was the stand out concern.

“Relying on the 9 per cent super guarantee is unrealistic. A person hoping to retire on $40,000 at age 65 will need around $500,000 in super — well beyond what 9 per cent super can provide over a working life,” Count chief operating officer Marianne Perkovic said.

According to simple calculations made by Count — which are indexed at 3 per cent inflation, exclude tax and Centrelink entitlements and presume you’ll live for 22 years after you retire — to have $30,000 in retirement, the capital required if you can earn 6 per cent per annum on your investments is about $482,320.

To have $40,000 you’ll need $643,039, for $50,000 you’ll need $808,866 and for $60,000 you’ll need $964,639.

Top ten financial mistakes regarding retirement:

1. Failure to seek professional advice prior to retirement

2. Investing inappropriately based on lack of understanding of risk and return

3. Cashing out lump sum ETPs inappropriately

4. Failure to save enough pre-retirement

5. Leaving assets in non-income producing investments

6. Selling investments when market falls and buying in peak

7. Timing retirement ineffectively for tax or investment purposes

8. Investing inappropriately due to lack of understanding of asset classes and suitable allocation

9. Expecting to maintain similar income level post-retirement

10. Assuming will qualify for the aged pension

(Source: Count Financial)