5 things I learned about retirement finances in 20 minutes

depressed man counting pennies from retirement fund

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I Googled ‘finances retirement’ and went to ‘news’ to get the latest. Here are 5 things I learned in 20 minutes online that could be helpful as you look at your finances for retirement.

1. A lot of people in their 50s are living hand-to-mouth

ME Bank reports that, in Australia, 25 % of 50-year-olds have less than $1000 in savings, and that the same percentage live from pay-to-pay.

Money expert and author Vanessa Stoykov says, ‘Although it’s dependent on your situation, it’s good practice to work out how much money you’ll need to retire, and then how much you need to live your current lifestyle per month and work out a budget that will help you reach your savings goals.’

She adds: ‘At this age, it’s important to remember your goals, and why you are following the financial plan you are. That way, your mindset will switch from feeling as though you are making sacrifices, to knowing what life will be like if you make that change.’

2. Too many with money don’t budget for retirement

A common issue faced by busy professionals, reports the Australian Financial Review, is knowing where their money goes and what their cost of living is.

The message is: ‘Those who find the time and develop a strategy for managing their income and spending plans, are in a healthy financial position and have confidence for the future.’

3. Parents spend twice as much on adult children than save for retirement

Coming out of the US, this Merrill Lynch report found 79% of parents provide financial help to their adult children (aged 18-34).

To put figures on it, it’s estimated that total spending on adult children comes to $US500 billion every year. At the same time, parents are only saving half that—$US250 billion.

The counsel is: ‘Parents who are giving money to adult children still need to stick to a budget and should not neglect their own retirement savings.’

‘There is certainly an emotional aspect to this,’ said Lisa Margeson, who headed the research. ‘You want to provide for your kids. At the same time you want them to become financially independent.’

‘But when you combine those emotions with money, parents really risk making financial decisions that can compromise their financial future and their children’s.’

4. Women have less confidence in retirement funding—with good reason

Australia’s Qantas Super CSBA Retirement Confidence Index shows that ‘women have far less confidence than men that they will have enough money for a comfortable retirement.’

The fact is that about 50% of women currently retire with a superannuation balance under $50,000. That compares with 33% of men in the same situation.

While the gap is closing, Dr Martin Fahy, chief executive of Association of Superannuation Funds of Australia, says, ‘These findings highlight deep concerns around the realities of retirement for women and the perception that they will not be able to adequately fund a dignified retirement.’

5. Many retirees aren’t as careful with spending as they should be

Retirees may demonstrate less discipline when buying things they don’t need, says a report.

Olivia Mitchell, a professor of economics at the Wharton School in Philadelphia, puts it this way, ‘They tend to consume more today and downplay having the money a year from now. They’re not so worried about tomorrow.’

And there’s a ‘knock-on effect where spend-today folks tend to do less to take care of their health and often overlook end-of-life planning such as completing a living will and advance directives.’

‘If you’re retired, you have a lot more time on your hands,’ says Annamaria Lusardi, a professor of economics at the George Washington School of Business in Washington, DC.

The problem is that retirees can use that time to shop or spend.

‘It’s important to see money as a means to do what we want and what we care about,’ Lusardi says. ‘Be savvy about it. Be in charge of your own finances.’

20-minute reflections

That’s a grab-bag of items about retirement finances. There are lessons and warnings; tips and thoughts; and hints and suggestions

The message about finances could be best summed up with:

Be aware: of your financial situation

Be proactive: and plan for the future

Be in charge: of your finances

Be focused: on the present for the future

Be positive: your attitude is important (that point is mine).

 

Bruce Manners is the author of Retirement Ready? and Refusing to Retire, and founder of RetireNotes.com

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