One in eight people had their retirement plans interrupted by needing to care for a loved one with a significant health issue, according to the Building better retirement futures report, produced by Fidelity International in conjunction with the Financial Planning Association of Australia and CoreData Research.
That same number faced another interruption to their retirement planning – redundancy.
The data is a potent reminder that, no matter how carefully you plan and budget for what you hope will be healthy, happy and financially stable retirement years, the reality is that unexpected events can throw a spanner in even the best-laid plans.
How to cope with those interruptions can be the difference between experiencing financial and emotional hardship, or protecting yourself from stress with strategies designed to look after your wellbeing and financial security.
Four potential interruptions to your retirement plans – and how to cope
1. Divorce
March 2023 data in the Divorces Australia report, from the Australian Institute of Family Studies (AIFS), reveal that divorce numbers for men aged 50 and older and women aged 45 and older are increasing. That can mean huge financial upheaval, especially if there are dependants involved.
As well as the stress of going out into the world as a newly single person with just one income, dividing up a lifetime of hard-earned assets can seem like a giant backwards step – especially when retirement planning is increasingly important.
Tip: Look for a lawyer who has a reputation for helping divorced couples settle as amicably as possible. The more time you waste over petty arguments about who gets which artwork, the more legal fees will chip away at your savings.
As well as being financially draining, divorce can have a huge impact on your physical and mental health. Taking time to look after your mental health is important. If you think you need additional support, talk to your GP about the best next steps.
2. There’s a recession
Any significant recession can have an impact on your retirement savings and future income.
Diversification of investments is always a smart financial strategy. For more information, talk to a trusted financial adviser to ensure you are happy with the spread of your retirement savings. Without the same opportunity to recover, financial losses in later life can be stressful.
Depending on your own financial circumstances, you may need to extend your working life, take on a part-time job, or live at a lower standard than you imagined. But remember that recessions do pass and better times can come again.
Understanding strategic ways to make your money work harder can help make a difference.
Reminding yourself that some things are beyond your control won’t help restore your bank balance, but it can help you put things in perspective and, hopefully, keep smiling.
3. You lose your job
Redundancy is never fun – especially if it happens in the last few years of your working life, not long before you planned to retire.
If your redundancy comes with a sizeable payout, talking to an experienced financial adviser can help you make the right decisions. Consider diversifying your investment approach to give yourself added protection from a potentially volatile market.
If retraining, or undertaking some added education can make a positive difference to your reemployment opportunities, it’s an investment worth considering. Yes, changing jobs at a time in your life that was meant to be about transitioning into retirement, rather than taking on new challenges, might feel stressful. But if it improves your chances of getting much-needed income to carry you towards the retirement lifestyle you hoped for, it will be time and money well spent.
4. You lose a loved one, or become their carer
The impact of long-term illness or disability can have a dramatic effect on your retirement plans.
Whether you have the responsibility of stepping away from your career and retirement plans to be a carer for a loved one, or you have your own care needs to consider, health issues can be a huge drain – both financially and emotionally.
Talk to a specialist to check if you are eligible for any social security benefits that might help, and remember to talk to your financial adviser to see if reconfiguring some existing investments may help you access funds you need.
Even small steps now may help extend the life of your retirement savings and give you the peace of mind you need to get through what lies ahead.
In the case of someone you love dying, receiving an inheritance – in the form of a life insurance policy payout or other assets – may have an impact on existing retirement income.
Getting the right advice from experts you know and trust is always recommended.
In tough times, every little bit of support helps.
Ways to get your retirement plans back on track
Depending on your life stage and individual circumstances, some ways to ensure your retirement plans get back on track may include:
- topping up your superannuation to minimise tax obligations
- diversifying your investments
- building greater equity in your home
- downsizing.
Seek retirement guidance
Reading, research and asking for help from people who know more than you about retirement planning can all help. Try to stay focused on long-term goals as you cope with the daily realities of your short-term interruptions. With the right planning, a secure retirement is still possible.
Has your retirement been interrupted? How did you cope? Share your tips in the comments section below.
Also read: How much you now need for a comfortable retirement
Financial disclaimer: The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
One thing never mentioned about redundancy later in life is this: If you have already reached your age-pension application age, any and all redundancy payments will be taxed. If you are still under the age-pension age it will be tax-free. A clearer case of age discrimination would be hard to find. This includes the severance or redundancy portion (which may be a significant amount depending on length of service) as well as any annual or long service leave and hours worked.
Remember age-pension age is different depending on when you were born and is slowly increasing to 67 years. The supposed reason is that the ATO does not deem it a genuine redundancy but rather ‘ retirement’. Of course, some people may use their redundancy to formally retire but many others had no plans to retire and do not want to. They have been made redundant, their position cut and yet are treated very differently just because of their age.