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The 20 Commandments of Wealth for Retirees

1. Ignore the prophets of doom – they are always with us and usually wrong.

2. Make sure your children have adequate insurance. It’s much more affordable than your funding their misfortune.

3. Understand compounding, and appreciate that the rate of return your portfolio can achieve will be a major factor in how long your money will last.

4. Understand the basics that never change, and take advice on the things that do.

5. Take advice before the deed is done – not afterwards. It’s hard to rewrite history.

6. Always judge an investment on its merits – any tax benefits should be regarded as the cream on the cake.

7. If a person contacts you by phone with an offer of an investment, or even to help you pay your mortgage back faster, hang up.

8. Don’t have all your eggs in the one basket – diversify across the major asset classes and certainly have some international exposure.

9. Involve your partner, if you have one, in all your financial decisions. This will make it easier if one of you passes away or becomes incapacitated.

10. Don’t panic when the share market has a bad day – volatility is the price you pay for the unique benefits of shares.

11. Make sure your wills are up-to-date and include a testamentary trust if that is appropriate.

12. Give Enduring Powers of Attorney and an Advance Health Directive to trusted people. And make sure they have copies and can locate the originals when needed.

13. One of the most expensive evenings you can go to is a “free” investment seminar.

14. Be extremely wary of going guarantor for any of your children – especially if they are in business.

15. Don’t spend unnecessarily just to maximise your Centrelink benefits. Further cuts to benefits are possible.

16. Investigate if you should have a Binding Death Nomination in your super fund. Keep in mind that what is appropriate in one situation may not be appropriate in another.

17. Each year assess whether it is to your benefit to stay in super. In some cases you may be better off to withdraw the balance and invest outside the superannuation environment.

18. Don’t follow the herd and back last year’s winner – that’s a recipe for disaster.

19. If you decide to take on a reverse mortgage involve family members in the process and have them pay the interest if possible. This will stop the debt increasing.

20. Finally – keep in mind that your potential worst enemies can be the media who focus on the negative, and well-meaning acquaintances who may give you information that may be half right.

 

Noel Whittaker is one of Australia's foremost authorities on personal finance and a best-selling author of many books including Making Money Made Simple. See www.noelwhittaker.com.au. A colour PDF version of this article is on his website.

 

6 Comments
DARYL PEACE
October 08, 2019

Am wondering what the downside is to having a BDN in place with your super fund ?

TNF
October 03, 2019

A classic list for all Australians, thanks Graham. Item 10 rings true this morning....

Johnno
January 10, 2019

Some further detail and explanation on item 17 would be appreciated. I don't disagree with any of the others. And I wholeheartedly endorse number 14 - if you do it then you are putting a gun to your head regardless of how well you regard your children or they regard you. All bets are off when the SHTF.

Graham Hand
January 10, 2019

In response to Noel's number 17 (you may be better off outside super), you can earn up to $20,542 before income tax is payable taking into account the Low Income Tax Offset, whereas super in accumulation phase is taxed at 15%.

Jason
January 11, 2019

For a retired couple of Age Pension age the effective tax free amount exceeds $59,000 per annum.

Bottom line is you can have a lot of income and thus capital in your own names from Age Pension age and pay no tax. It can result in a better net outcome as you avoid the cost of using the super structure and you may also avoid the potential tax implications on the Taxable component of super benefits.

Liam
January 14, 2019

But before exiting super think about any possible future inheritances or equity release from downsizing or tree change that may alter your personal tax position. Always think of the long term rather than just your current circumstances.

Finally make sure you are willing to take the investment decisions need to make your money work for you outside super. No sense in taking funds out of a default super/pension earning 5%+ if you are going to leave in a Term Deposit or cash account.


 

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