Regardless of your earlier financial choices, the financial decisions you make in your 60s will have a profound effect on the rest of your life.
Authorised financial adviser Joseph Darby explains five common financial mistakes to avoid in your 60s.
1. Holding savings in a bank account and/or term deposits
Cash held in savings accounts or term deposits is a great idea to cater for emergencies, or when sums are needed within the next year or two.
But holding cash for any longer is widely accepted as being unwise for your long-term financial well-being.
Because of the low returns, over the long term essentially every other type of investment is expected to outperform term deposits.
In some circumstances your money may not even be keeping up with inflation, but you could also be missing opportunities to invest and grow your wealth.
Worse still, term deposits and savings accounts aren’t guaranteed by the government any more, so your funds probably aren’t even as safe as you think.
2. Being asset-rich and cash-poor
Longer life expectancies, increased property values, and the rising cost of living means that an increasing number of Kiwis are finding they’re “asset-rich but cash-poor”.
These people typically have valuable assets (usually their own home), but limited cash on hand and little other meaningful income to give them the choices, security, and freedom that their wealth could provide.
This issue can usually be avoided by starting thorough retirement planning, or downsizing to a smaller home sooner rather than later.
Downsizing can unlock the value held in the family home and reduce expenses such as upkeep, rates, and insurance.
3. Not understanding risks and taking steps to protect your assets
If you die without a will, the law says who is entitled to share in the estate. Financial advisers frequently encounter situations such as:
Retired or retiring couples with children who aren’t aware that if one of them dies without a will, the surviving partner will only receive the personal chattels plus NZ$155,000 (with interest) and a third of anything that’s left. Everything else is divided among the children.
Individuals, such as widows or widowers without children or surviving family, who aren’t aware that if they die without a will, everything they own will pass to the State, which will decide if anyone else is entitled to anything.
Not only that, but have you considered what will happen if you become injured or mentally incapacitated, such as through illness or an accident? This is what an enduring power of attorney is for.
4. The retirement splurge
There’s absolutely nothing wrong with splurging some of the funds you’ve sacrificed and worked to accumulate for your ‘golden years’.
However, all too often we come across people who have just spent all their KiwiSaver money to do something like landscape the garden, before they’ve calculated the implications for their retirement.
Some simple planning, including identifying your life and financial goals, will go a long way to preventing this issue.
You can either do this yourself or have a professional financial adviser assist you.
5. Being too trusting
You don’t have to search far too come across stories about people who are supposed to be enjoying the best years of their lives in retirement, but instead found their lives ruined by placing too much trust in someone who was close to them.
Sometimes the older person, possibly after many years of having their estate in order, is persuaded to change their will or enduring power of attorney to put all the power in the hands of someone who wants to take advantage of them.
Financial abuse of the elderly is a lot more common that you’d think.
Take appropriate advice from legal and financial specialists, and then do what’s needed to protect yourself and your money.
First published 17 September, 2018
Story by Joseph Darby
Joseph Darby is an authorised financial adviser and Chief Executive of Milestone Direct Ltd. The views and opinions expressed in this article are those of Joseph Darby and not necessarily those of Milestone Direct Ltd. A disclosure statement is available on request and free of charge.
JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate.