“Life is what happens to us while we’re making other plans…”
One of the greatest oversights that we often make when planning for our retirement is to factor in the contingencies – those unexpected events that can often cost us far more than we expect or plan for. With advances in medical technology and life expectancy continuing to the rise to the point now where those born today are likely to live to 100 years old, many of us will need to be planning for a retirement that could last 25 years or more. By allowing for contingencies throughout our retirement, we can start to ensure that we reduce our own financial vulnerability in our golden years.
This month I had the privilege to work with the team from Talking Point at Channel News Asia to explore what is a realistic retirement age in Singapore, how much people should be saving for retirement, and what surprise factors need to be considered when planning for how much you’re likely to spend in retirement. You can check out the full episode here and below:
When it comes to planning for contingencies in retirement, the same principles apply for Australian expats and those living down under. Whether you’re planning to retire in Australia or elsewhere, it’s important to consider the financial impact of life’s unexpected events. You can then start to get a true sense of how much you will need to save to retire and live the lifestyle that you desire.
There is no ‘one-size-fits-all’ approach to planning for your retirement and how much you’ll need to live comfortably, so it’s important to consider your own lifestyle and start planning as early as you can. It’s important to also factor in inflation in your planning – recent studies by ASFA have shown that retirement spending costs have risen by between 23 – 36% over the past decade in Australia, and this is unlikely to slow down going forward.
Let’s consider some of the contingencies you should be considering when planning for your own retirement:
- Medical expenses
Research has shown that Australians tend to spend more years in ill-health throughout retirement than most other developed nations. With life expectancy increasing, it’s important to build this into your own planning. Illnesses can include cancers, diabetes and cardiovascular disease, the costs for which may or may not be fully covered by your private health insurance or the public healthcare system. You may also find that private health insurance co-pay arrangements can change over time.
You may also find that one partner needs to enter long-term care, which can be a significant financial outlay, particularly if you still need to maintain the current costs of keeping your home. Be sure to speak to a qualified financial planner or estate planning professional to consider how you plan to cover these costs ahead of time.
- Helping out the family
We’ve all seen the articles about how tough it is for today’s younger generation to get onto the property ladder – if only those avocado prices would just come down. We’re seeing many grandparents wanting to lend a hand to their children and grandchildren when it comes to getting into the property market, or even assisting with school and university costs for their family members. It’s great to be generous and help out your family, but it’s also important to consider the financial implications of doing so, particularly if you’re collecting the Age Pension.
- Maintaining your home
Home maintenance costs can often come as quite a surprise and quickly deplete your retirement savings. Whether it’s replacing the carpet, repairing the roof or fixing some damage, it’s important to consider the impact of these costs. You may also find that as you progress through your retirement years that you need to outsource some of your home maintenance items such as mowing the lawn or cleaning out the gutters.
Many retirees will consider downsizing their property at retirement to reduce the home maintenance required, however this option may not be suitable or available to everyone. The Australian Tax Office (ATO) allows for those downsizing their home to contribute up to $300,000 into their superannuation accounts providing they’re over 65 and meet the eligibility requirements. You can find out more about this here.
- Travel expenses
Travel should be a budget item that can easily be planned for and avoided where necessary, however I’ve decided to include this as a contingency, as I think we can all agree that we can often surprise ourselves with just how easily we can spend money while on holiday. Consider your travel ambitions in retirement and ensure that you factor this into your overall budget.
The more time and effort you spend planning for these unexpected events in your retirement will ensure that you have the peace of mind to enjoy these years that you’ve spent a large portion of your life working towards.
To your financial success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.