Money tips in retirement

Money and spending habits are very different in retirement than during your working life. 

The main consideration is that in retirement you have a finite amount of savings and superannuation and when that runs out that’s it. 

Topping it up by working more is not always an option so you may need to adopt more rigid budgeting and spending habits.

However, for some people – who have focused on earning and accumulating for their future – the idea of spending can be a major change to their behaviour which they find difficult to adapt to.

Story Wealth Management CEO Anne Graham CFP® says she recently saw a client who had recently retired. She did some modelling on their financial position and they had quite a few assets, super and wish list they wanted to do including giving money to their kids. 

“I was able to tell them that they could do all the things on their list and still have millions by the time they got to 95,” she said.

“Some people have more options than they think they have because they’re not used to spending – they’ve been saving, investing and paying debt. So, in retirement they’re not used to having an abundance of choice.

“But for others they need to be mindful of spending because once it’s gone it’s gone.”

If someone aged 35 and working has a lavish holiday or buys an expensive car, they have many years to make up that money. However, at age 65 it’s more difficult to recover from a splurge. 

“It’s important to be realistic in what you can afford to do. You might want to give your kids $100k but you can only afford $5k, so give them $5k,” Graham says.

“Some people are used to having a new car every three to five years but a lot of people can’t afford to do that once they stop working. It’s just about resetting expectations.”

Other concerns on the radar in retirement are aged care and medical expenses.

Aged care is difficult for most people with the idea of quarantining a deposit to secure a position in an aged care facility out of reach. When the time comes a decision will likely be needed regarding selling the family home, Graham says.

And while many retirees are keen to keep private health care to ensure they can circumvent long waiting lists for surgery, a cost of between $3000-5000 for private health care is prohibitively expensive for many.

Andrew Dunbar CFP® says the first thing people need to do in retirement is really figure out what’s important and what you really want to make of your retirement and the being able to prioritise those things.

 “You need to set up in a structure that’s individualised for what’s important to you,” he says. 

People may worry about money or making sure they can do all the things they’ve been looking forward to in retirement.

“So having your investment structure that gives you that peace of mind to be able to sleep is important. And one of the examples of that is, you know, that there’s going to be some inevitable storms over your retirement years. 

“You’ve got to set yourself up to be prepared for those and that can involve holding a bunch of cash, it can involve having a savings bucket strategy where you have some short term money in cash, you’d have some medium-term money and fixed interest and infrastructure type investments and you have some long term money in shares and property and so forth, means that you’re not needing to draw down on those longer-term investments at a time when they’re potentially performing poorly. And that can be a way that gives you peace of mind.”

The other thing is that as life expectancies grow and continue to grow, we’ve got to achieve a fine balance between still needing a reasonable return on our money to make it last but we don’t want to take too much risk that we lose our money in retirement as well. 

“Depending on that risk appetite, some people might choose to lock up some of their money in lifetime annuities and that gives them certainty that they’re going to have a base level of income, no matter how long they live, particularly people with small balances,” Dunbar says.

The Money & Life website is operated by the Financial Advice Association (FAAA). The information in this article is not intended to influence the viewer to make a decision in relation to any particular financial product, class of financial product, or interest in either of these.  The FAAA is not licensed to provide financial product advice.  Nor is it able to provide legal or taxation advice. The FAAA does not assume responsibility for the information accessible via any links provided in this article.  Please consider seeking advice from a qualified professional to ascertain how the information in this article and the links provided may relate to you.


The FAAA is the leading professional association for financial advice professionals in Australia. The FAAA advocates for the interests of financial advisers and their clients across the country. Find out more here.
Share the Post: