Coal Coast Mag - How To Manage Your Money... Your money questions answered
I am on the verge of retirement and am worried about how to best manage my finances after I stop working. We are mortgage-free with no dependents living at home. What should I consider?
Retirement, or what we prefer to call the ‘Post Work Reward Phase’ should be an exciting and worry-free time in your life. Prior to making this significant shift, it pays to plan for the future to ensure this phase comes with as little stress as possible. The earlier you start preparing for life after work, the more options you have to set a course that suits you and the lifestyle you envisage.
Leading up to this time, it is important to take stock on the assets and structures you hold, what you will likely need and have a rough estimate on what you will look to spend year on year. There are some simple calculators on the MoneySmart that provide a meaningful output for reflection. Based on these outcomes, you may decide to alter your retirement plans, and consideration may be given to actions such as a savings plan, sale of a lifestyle asset (downsize home), adjusting your expectations and or timeframe. The key is to be as informed as possible, early.
What we believe is most important in retirement planning, is making sure your finances are structured in a way that meets your needs and provides the best outcome for you and your family. There are a number of significant opportunities for pre and post retirees to take advantage of structurally, such as maximising Superannuation, with a view to establishing tax free pensions. If one is considering changing their home, other more recent rules concerning superannuation contributions may also be a consideration. Ensuring tax is minimised, and administration of one’s financial life is as simple and efficient as possible is a further key benefit for most retirees.
There are many other important elements to consider, such as Centrelink and the Age Pension, Downsizer Benefits, Aged Care, Estate Planning, Super Income Streams, Taxation and the list goes on. We personally believe this pre-retirement phase is one of the most important times to get expert attention from a Financial Adviser, as strategic advice can have an extensive long-lasting impact.
I have almost saved enough for a house deposit, and am unsure about what I should be looking for in a mortgage. Any tips?
You have been saving away your hard earned money and you have almost saved enough for a deposit – congratulations! Choosing your new home is obviously the major decision from here, but taking the time to select the right mortgage is almost as critical because if done well, you could save tens of thousands of dollars or you could pay out the loan years earlier!
A lot of people start by approaching the bank that their parents signed them up to when they were kids. Whilst this is convenient, it can be a mistake as the bank will recognise your loyalty and decide that as you are already with them, they don’t need to pass their best rate on to you. The other problem with this approach is that you are putting the cart before the horse. You are far better off to determine what functionality you need in your loan and based on this, you can select a lender that offers this at the best rate.
The challenge for a new home buyer is navigating the minefield of banking jargon to understand what suits your situation and ultimately what is going to save you the most interest - Variable rates, fixed rates, P&I, interest only, offset and redraw can all benefit the customer in the right situation but everyone’s situation is unique and therefore the most suitable mortgage will vary from person to person. Research some of these terms or speak to a mortgage broker who can help you to get an understanding of what type of loan would be best for you.
In answering readers' questions the advice is of a general nature and is not a substitute for personal financial advice from an independent adviser.