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Having looked forward to retirement for years, it was difficult to accept that two people who had spent decades living happily together could spend so much of their time arguing over money. The question of how much to spend in retirement became a significant source of tension.
“Enough,” I cried in frustration. “We need help from someone who can tell us just how much you can spend on a new car to tow the caravan and how much I can spend on updating a twenty-year-old kitchen without us running out of money,” I said.
Seeking Professional Advice
Within days, we were in the office of a local financial planner, who had no doubt heard it all before. The starting point, he said, was to determine just how much money we had saved for spend in retirement and then determine if it was in the most tax-effective location – that being superannuation.
From there, he explained we needed to be proactive in our investment choices without taking on too much risk. For example, leaving our spend in retirement funds in bank accounts earning next to nothing in interest might make us feel safe, but it would be a mistake long-term.
Setting Financial Goals
Then he set us some homework. First, we both had to go away and write down the ten most important financial goals we wanted to achieve in retirement without consulting each other.
At our second meeting with our financial planner, we were surprised to learn how similar our lists were. Top of both lists was the desire to not run out of money to spend in retirement, to which our financial planner laughed.
This was easily done, he said. Just make sure you never spend more than the income being earned by your investments. The best way to achieve this? Sit down with me each year, and we’ll go through how much money your investments have made and set your income for the year ahead accordingly.
Addressing Disagreements
It soon became obvious our biggest area of disagreement was that my husband wanted to leave a substantial legacy to our children, whereas I did not.
After much discussion, we finally agreed that we would both be happy as long as the children inherited the family home. If there were extra funds available to be left to them, well, that was all well and good, but we agreed it was not a priority.
Another key area of contention was what to do if we needed additional care as we grew older and, more importantly, what we would do if one or both of us needed to go into an aged care facility.
Again, our financial planner had talked many people through these issues, and we felt much more relaxed once we understood all our options. It seems lots of people face these same issues every day.
Financial Safety Nets
As our financial planner pointed out to us, the fact that we owned a substantial family home in a capital city was almost like a financial safety net for us, and we could always use the downsizer rules to boost our superannuation if needed.
Interestingly, the areas that had been causing the most arguments were the easiest to solve. Once we worked out exactly how much money was in the kitty to support us in retirement, we both agreed to spend a bit less on the new kitchen and car to ensure we didn’t run out of money.
Planning for Future Spending
With our money dispute resolved, for now, and a plan in place for our future spend in retirement, we were both relieved and thankful we’d put in the effort to seek expert advice from a financial adviser. Understanding how to spend in retirement without depleting our savings was crucial.
Key Takeaways
- Seek Professional Advice: Consulting a financial planner can provide clarity and help set realistic financial goals.
- Set Clear Goals: Identifying and agreeing on financial priorities can prevent disputes.
- Be Proactive with Investments: Avoid leaving retirement funds in low-interest accounts.
- Plan for Care Needs: Discuss and plan for potential aged care requirements.
- Use Financial Safety Nets: Utilize assets like the family home to support retirement needs.
- Regular Reviews: Annual reviews with a financial planner can help adjust spending based on investment income.
By following these steps, you can ensure that you spend in retirement wisely, maintaining financial stability and peace of mind.
To read more about how much you’ll need in retirement head to the Moneysmart website.
