1. Outdated investment strategies
As you approach retirement you should revisit your investment strategy. That doesn’t necessarily mean putting all your money into defensive assets like cash and term deposits. Diversification is the key to smoothing out the inevitable bumps when economies, sectors and assets rise and fall. A well-diversified portfolio includes a good mix of asset classes — such as cash, fixed interest, property, shares and alternative assets.
Just as your investment needs change, so will your insurance requirements. For instance, if you’ve eliminated or significantly reduced your debts, you may not need as much life insurance or income cover as you once did. If you’re an empty nester, you’re insurance needs are likely to be very different to those of a young family’s sole breadwinner.
Your lifestyle might have also changed over the years — for example, you may no longer engage in high-risk work activities or leisure pursuits like skiing. So make sure your cover matches your needs.
3. Missing out on tax benefits
Before the end of your career, it may be worth considering a Transition to Retirement (TTR) strategy. This involves drawing a pension from your super savings while you’re still working, which you can start doing once you’ve reached your preservation age. This pension income is likely to be taxed at a reduced rate or be tax-free. At the same time you can boost your super contributions through salary sacrificing, with any contributions of up to $35,000 taxed at just 15%.
This can give a valuable boost to your nest egg during the crucial pre-retirement years.
4. Inadequate estate planning
Although it’s probably not something you like to think about, it’s important to consider what will happen to your estate when you pass away. When it comes to super and insurance, this means nominating who you want to receive your super savings and any payable insurance benefits. The tax implications for your beneficiaries can vary depending on their age, their relationship to you and whether the payments are classified as a lump sum or as an income stream. It’s therefore a good idea to seek professional advice on this when you’re putting your affairs in order.
5. Going it alone
Everyone’s circumstances are different, so your super strategies should be too. Talking to a financial adviser is the first step towards getting the most out of your super. To arrange a complimentary meeting, contact us today on 08 9381 6811.