Retiring too soon - a common problem

Too many people think they have to stop work at age 65, before finding out just what cashflow they will have or need in retirement.

If it is just too little, they would be better working a little longer. Just working two years longer means you can save for two more years, probably enough for an extra two years in retirement.

By working that two years longer, your retirement funds have to last for about 22 years instead of 24. Two more years' work can put you up to five years ahead.

Spending too much: It's pretty obvious, but do your homework and budgeting. However, you may plan to gradually spend your money and "die broke" (easier said than done).

Be smart and find independent advice to help you monitor how fast you are spending your money.

Spending too much on housing: Not much good owning a $500,000 house and having only $50,000 in the bank to supplement your (rather lean) government super of $26,000 pa. Don't get to retirement living in a castle, but with too little cash.

Turn the news off and get out and about. Learn about investments as you save for retirement, and, hopefully, avoid the disaster some people incur when they put all their money into one or two finance companies.

Failing to get financial and planning advice: If you fail to plan, you plan to fail. Get advice - if it costs $150 to $200 a year, then that is peanuts compared with what it may do for you. It may save you thousands. It may even save you tens of thousands. An independent adviser might help you "see the wood from the trees".

Utopia does not exist yet. I have seen people move up to seven times in five years looking for it. Imagine the moving costs, real estate agents' fees, cost of new carpet, curtains, kitchen, or a fence. If somewhere else appeals, camp, house-sit or rent there for a while and try it out. Get advice about how much you can safely spend if you are worried.

There are dozens of free things you can do in Aotearoa with an ordinary car and an inexpensive caravan. Be adventurous, go on the road and enjoy it all, we have a beautiful country.

Getting burn-out, then quitting work (retiring too soon) because you are exhausted, is not smart. It will be cheaper in the long run to take breaks as you go along, so you can have more quality of life and, if necessary, extend your working life.

Beware of some apparently wonderful companies; the costs can be too high. Also beware of commission salesmen and others who make brokerage for telling you to buy this, sell that, buy this, sell that. They are looking to generate income for themselves, and their "advice" may be good for their pocket/profits, but it may not be good for you.

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  This article was supplied by Alan Clarke, the author of Retire Richer - a practical guide for those aged 25-85. Alan is an authorised financial adviser (AFA).