• Serendipity Team

The one goal for 2022 that your future self will thank you for

Welcome to the New Year! January is traditionally a time where we focus on setting new year’s resolutions and financial goals. These goals will typically centre around our short term and more immediate needs, whether those are plans to eat better and exercise more, make career moves or book that well overdue family holiday. However, when it comes to setting our sights on the future and thinking more long term, most of us tend to struggle. Behavioural economists refer to this as ‘present bias’, meaning that you are psychologically wired to prioritise your needs today over your needs in 5, 10 or 20 years time.

So what happens when we fast forward into the future and take a look back on our journey? Well, research by the Financial Planning Association of Australia (FPA)* did just that and found that our biggest financial regret is not saving enough, with 1 in 5 Australians regretting not planning ahead.

With that in mind, this month let’s give you the benefit of hindsight and take a moment to discuss one of your most important long term goals – retirement planning.

Retirement planning is not something we typically give much thought to until we are on the doorstep to retirement. However, the power of compound interest means that the earlier you take action the easier it will be to preserve your lifestyle in retirement while also enabling you to enjoy the years in between (not to mention, you will sleep much better at night knowing that the future has been taken care of!).

In this article we will take a look at some common obstacles to planning for retirement and simple steps you can take today.

Obstacle #1. I don’t know what I want my retirement to look like

The further away your retirement date is, the harder you will likely find it to imagine retirement and set some financial and lifestyle goals. Often, not knowing what we want our future to look like is the biggest barrier to forming any type of financial plan. In fact, research by the FPA has found that 73% of Australians find it hard to plan their life, with the top obstacle being not knowing what they want.

However, in order to make any type of financial plan it is important to have some rough goals to aim for. Think of it like building a house – you don’t have to know what the inside décor will look like, but having an idea of whether it is a cottage, apartment or mansion is great stepping stone to figuring out the numbers. Try not to place too much pressure on yourself to get the answer spot on. None of your goals will be set in stone and as the years go on you will likely change your mind about some of the finer details and that’s OK.

Solution: Start by taking a look at your lifestyle at the moment and give some thought to simple things you would like to change. For example, what would you like to be doing more of in your free time? Who do you want to spend more time with? What passions and hobbies do you think you would like to pursue? How is your health – is there anything that you are concerned about becoming a challenge in the future?

Obstacle #2. I don’t know how much I need to retire with

Coming up with a retirement number can be daunting. Combine the fear of finding out you don’t have enough with a dislike of number crunching and you have the perfect excuse to avoid looking at your retirement plans. However, it doesn’t need to be nearly so overwhelming. Now that you have some idea about your lifestyle goals in retirement, it is much easier to know what your living expenses will look like. By knowing your annual income needs and your preferences around retirement age, you can then determine your retirement number without too much trouble.

Solution: Take a look at your current budget and tweak it by removing some expenses you won’t have in retirement (like mortgage payments or school fees) and adding in some rough numbers for new expenses – whether those are extra holidays, art classes or medical bills. This will give you a good idea of your income needs in retirement.

Obstacle #3 I can’t afford to bridge the retirement gap

Very often we bury our heads in the sand about retirement because we fear the impact retirement planning will have on our existing budget. However, the reality is that there are many options available for boosting your retirement savings with limited effect on your current lifestyle. For example, reviewing your super funds fees and investments can boost your long-term savings with very little effort from you. Taking advantage of tax planning and salary sacrificing strategies can mean using tax savings to boost your super and reducing the impact on your cash flow. And last but not least, let’s not forgetting shopping around on your utility bills and insurances and directing these savings towards your super.

Solution: Take a look at your regular bills and see how your fees compare to what is available on the market (a quick google search will do). Next, pull out your bank statement and check for any subscription services you no longer use. Write down the potential savings that can be directed towards future you.

The truth is that no matter your age, it is never too early to start thinking about retirement. What’s more, the magic of compound interest means that the earlier you start setting money aside for retirement, the less you will need to invest and the more money you will have available to enjoy today. In short, starting early is the perfect antidote to the eternal tug of war we face when it comes to balancing our immediate and our long-term needs.

Our books are open, and we are available to work with you in-person in Sydney, Newcastle or Australia wide via video conference. To get started, just click here to book an obligation free consultation.

What you need to know

This information is provided and produced by Serendipity Wealth Advisors. The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

*Financial Planning Association of Australia, 2017, “Live the Dream : Research into Australians living a successful life”