This article is a first-person account written by a very typical financial planning client with a very typical financial planning fear – “Will we run out of money in retirement?” Here’s how a financial planner was able to ease those fears.
Having looked forward to retirement for years, it was difficult to accept that two people who had spent decades living happily together could spend so much of their time arguing over money. But that’s exactly where my husband and I found ourselves.
“Enough,” I cried in frustration. “We need help from someone who can tell us just how much you can spend on a new car to tow the caravan and how much I can spend on updating a twenty-year-old kitchen without us running out of money,” I said.
Within days we were in the office of a local financial planner, who had no doubt heard it all before. The starting point, he said, was to determine just how much money we had saved for retirement. Then we’d need to determine if it was in the most tax-effective location (that being superannuation for us).
From there, he explained we needed to be proactive in our investment choices without taking on too much risk. For example, leaving our retirement funds in bank accounts earning next to nothing in interest might make us feel safe, but it would be a mistake long-term.
Then he set us some homework.
First, we both had to go away and write down the ten most important financial goals we wanted to achieve in retirement. (We had to do this without consulting each other.) At our second meeting with our financial planner, it was interesting to learn how similar our lists were.
Top of both lists was the desire to not run out of money in retirement.
Our financial planner laughed. This was easily done, he said. Just make sure you never spend more than the income being earned by your investments. An easy way to do that would be to sit down with him each year, go through how much money our investments had made, and set our income for the coming year accordingly.
What about our other goals?
Well, it soon became obvious our biggest area of disagreement was that my husband wanted to leave a substantial legacy to our children, whereas I did not. After much discussion, we finally agreed that we would both be happy as long as the children inherited the family home. If there were extra funds available to be left to them, well, that was all well and good, but we agreed it was not a priority.
Another key area of contention was what to do if we needed additional care as we grew older and, more importantly, what we would do if one or both of us needed to go into an aged care facility.
Again, our financial planner had talked many people through these issues, and we felt much more relaxed once we understood all our options. It seems lots of people face these same issues every day.
Our financial planner pointed out to us the fact that we owned a substantial family home in a capital city was almost like a financial safety net for us. And we could always use the downsizer rules to boost our superannuation if needed.
Interestingly the areas that had been causing the most arguments were the easiest to solve. Once we worked out exactly how much money was in the kitty to support us in retirement, we both agreed to spend a bit less on the new kitchen and car to ensure we didn’t run out of money.
With our ‘present moment’ money dispute resolved, and a plan in place for our future retirement spending, we were both relieved and thankful we’d put in the effort to seek expert advice from a financial advisor.
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