The best thing we can do in terms of finances and retirement is to be prudent. We should plan on the assumption we will live somewhat longer than our health and family background may indicate.
What if we live much longer than the average? When it comes to our finances, there are three stages in retirement.
GO GO: We may have the health and energy to get out there and buzz around New Zealand and overseas. In this stage, we can get through some money, maybe quite a lot.
SLOW GO: Our health slows us down, or maybe we are just getting older and don't have any great inclination to go far from home. Spending will usually fall.
NO GO: We need some care or a lot of care - let's hope that doesn't happen to any of us. Spending at this stage can rise, but often can be offset by selling our home, and investing the funds to help pay rest home fees.
GO GO is where we spend the dough
Obviously we are likely to spend the most money in the first stage of retirement. This is, of course, the big conundrum with money and retirement.
How much do we spend at the GO GO stage?
There is no clear answer to this question, but if you work with an adviser for a while he/she will soon get a handle on your outgoing cash/spending, and can usually tell if you are spending your money too quickly or not. Hard though it may be, reviewing things progressively can work out so much better, without shocks and in an orderly fashion. You can use calculators too such as www.calcxml.com/calculators/how-long-will-my-money-last
What if your money runs low?
Obviously the best thing to do is plan well ahead so this is less likely to happen.
Someone recently wrote that it's not so bad, you can live on government super (just), so all people need do is cut their cloth accordingly and live on their income.
I personally would rather not try that.
Your Single Best Option Plan ahead and review your plan annually, using professional advice.
Why some people live longer Various surveys of people aged 90-plus have been done, looking for a common thread to their longevity. In one study, researchers discovered that excessive weight, smoking, stress, hard work and so on do not necessarily kill us.
The main longevity factor was that these people could let things go.
They did not hold on to bitterness, anger, resentment, hatred or to past wrongs that people had done to them.
* Learn about money management in advance in case you live longer.
* Annual reviews - as always - are needed.
* If you have rose-coloured glasses, discard them.
* There are options if your money runs low. Learn about them ahead of time.
* You can work longer.
* You can find ways in retirement to generate more cashflow (email us and ask).
* You can "eat your house" by moving to a cheaper town.
* You can build a granny flat in your children's backyard.
* You can sell your house to your children.
* Only use reverse mortgages as a last resort.
This article was supplied by Alan Clarke, author of Retire Richer - A Practical Guide For Everyone Aged 25 to 85. Clarke also blogs on www.investandretire.co.nz and is an authorised financial adviser whose disclosure statement is available on request and free of charge.