What financial advisers wish you knew

“Many clients come to me thinking that once they’ve implemented a financial strategy, everything will then just hum along automatically in the background without them needing to give it any more attention. This couldn’t be further from the truth,” says Joe Stephan, from Stephan Independent Advisory in Melbourne.

“Circumstances change from one year to the next. You could find part-time work, move house, travel or so on. These events will all impact on the strategy you originally implemented, which is why you need a financial system that can be tweaked to reflect lifestyle changes and meet your personal goals. Good retirement planning starts with having clarity around you and your family’s goals in retirement and the ability to audit your current lifestyle needs to have an accurate read on your future needs.”

Fund your retirement by downsizing

“We all go through different stages in life,” says Helen Barker, financial adviser and author of On Your Own Two Feet. “As you get older and the kids leave home, you may no longer need the big house you purchased when they were young.

Selling down to something that’s a bit smaller and releasing that money for yourself as part of your retirement plan is a smart move. The biggest benefit in investing in your own home is that there’s no tax, whereas with an investment property you pay capital gains tax if you sell it down the track. The trick is to make sure you don’t go for a smaller apartment that’s the same value you sold your house for because then you don’t get ahead.”

Know the rule of 72

“I like to tell clients about the quirky little rule of 72,” says Pierce Hanlen, senior associate adviser at Hewison Private Wealth in Melbourne.

“We all want to double our money, right? Well, determining how long it would take to double your money if you didn’t add to it or draw any investment earnings, such as compound returns, comes down to dividing 72 by either your timeframe or rate of return. For example, let’s say you wanted to double your money in 10 years: 72 divided by 10 equals 7.2, meaning you need an annual rate of return of 7.2%. Alternatively, let’s say you have the opportunity to earn a rate of return of 6% each year: 72 divided by 6 equals 12, meaning it would take 12 years to double your money. It’s a simple way to determine what level of risk you might need to take on to achieve your goals.”

Think of retirement as financial independence, not the end of work

“Often the idea we have about retiring is stopping working altogether, but I ask my clients what they plan to do after that,” says Mick Steffan, Principal Adviser with Independent Advisers WA.

“It’s much better to think of retirement as achieving financial independence. In other words, having enough savings to make working optional. This leads to a more active life after retirement, which may involve part-time or volunteer work or an active involvement within an organisation that you’re passionate about. Keeping mentally and physically active is a key to a happy and healthy retirement lifestyle.”

Know your numbers

“More than half the people I see have no idea what their numbers are,” says Bari Tessler, financial coach and founder of online course The Art of Money.

“That’s because almost nobody has had a good education about money, and for many of us it brings up feelings of fear, insecurity and even shame. But just getting comfortable with tracking your income, your expenses and your cash flow is very empowering,” she says. “Find a good bookkeeping system and use it. Getting clear about your relationship with money makes a difference.”

Expect to live a long life

“Statistics place Australian life expectancy as second highest in the world after Japan. Men should live to 86 and women to 89. Also, by 2050, this expectancy is likely to rise to 91 for men and 93 for women,” says Dennis Maddern from Maddern Financial.

“What this means is that planning your retirement is crucial. Retirees can utilise casual income, investments, mature age pension and superannuation payments,” he says. “The sleeper in all of this is the Health Care Card, which lets you receive medications on the PBS. It’s always best to check with an independent financial adviser to make sure you are in the best position to benefit from these incomes.”

Know what your plan is to live the life you want

“Antoine de Saint-Exupery said that a goal without a plan is just a wish,” says Naomi Horobin, Director of the Clover Group in Canberra. “Planning for financial security and freedom in retirement doesn’t stop when you move into this phase of your life. Have a plan for about 30 years or more. A lot can change in 30 years. Expenses might include bucket-list travel, updating your car, home repairs and maintenance, family support and health care. If you know how much you can spend, you will be able to make your own decisions, live your life and spend your money without worrying about the future.”