5 ways to boost your retirement confidence

Planning for your retirement can be a time of mixed emotions. It’s hard to plan for something you’ve never experienced. To help you make the best of your post-working life, Dr Eraj Ghafoori, a behavioural economist at AustralianSuper, shares some tips to improve your retirement confidence.

Reaching the end of your career brings big changes to your everyday life.

As you approach retirement you might worry about how you’ll sustain yourself financially, or how your social network, health and identity might change.

To help improve retirement outcomes, AustralianSuper and Monash University have developed a Retirement Confidence Index (RCI).

The RCI outlines 4 key factors that people can focus on to help improve their retirement experience:

  • financial awareness and skills,
  • health and wellbeing,
  • social factors,
  • and retirement awareness and planning.

 

The anticipation of retirement is worse than the reality

Over the last 4 years, the RCI has found that the fear of finishing your working life often subsides after you’ve retired, suggesting that the anticipation of retirement is worse than the reality.

These 5 tips can help to ease some of the worry around moving into retirement and help you plan with confidence.

 

1. Start your retirement planning at 50

Retirement can feel so far in the future that people often underestimate the time needed to prepare for it.

While it’s important to engage with your super or retirement fund as early as possible, Dr Ghafoori recommends that people start seriously thinking about and making plans for their retirement at 50.

‘Your 50s is the time when you should be planning – if you retire at 60 or 65 that gives you about 10 years to build up your wealth and plan all the other factors that can help you have a more pleasurable retirement experience,’ says Dr Ghafoori.

‘Just like buying a house or a car, the more we plan, the better our research, the happier we are with our choices – retirement is no different.’

 

The Retirement Confidence Index Tool

The Retirement Confidence Index Tool lets you to estimate your own retirement confidence score, compared to the average person living in Australia, aged over 50. It also looks at the 4 key factors which contribute to confidence in retirement.

 

QUIZ: WHAT’S YOUR RETIREMENT CONFIDENCE SCORE

 

2. Set some realistic retirement goals

Having clear and realistic goals based on your income and personal circumstances is one of the best ways to combat the fear of the unknown.

‘It’s about planning and setting the right milestones for yourself towards retirement, because the more realistic your goals, the better chance you have of achieving them,’ says Dr Ghafoori.

Look at your current lifestyle and how much you’re earning, then consider what you’d like your future to look like.

Dr Ghafoori says, evidence indicates that people often underestimate their life expectancy and overestimate their day-to-day spending needs.

‘People are underestimating their life expectancy by 6 to 8 years, which raises concerns from both a budgetary and health-related perspective.’

‘Pre-retirees believe they’ll need to spend more money, but once retired, we’ve found that they feel less anxious on this point,’ says Dr Ghafoori.

‘There’s also an element of their day-to-day spending while they were working that they don’t need anymore. They may have bought lunch every day, or paid for a car park or public transport – things they no longer have to do, but they’re used to considering those items in their spending.’

Dr Ghafoori recommends creating a scenario of what your future will look like.

‘Talking about your retirement, reading about it and speaking to people who’ve experienced it is the first step to becoming more knowledgeable and it will help with your planning when the time is right.’

 

3. Have a good understanding of your finances

Financial literacy and planning are key to retirement confidence

‘Raising your financial literacy improves your attitude, control and management of your finances, and reduces anxiety when it comes to retirement,’ says Dr Ghafoori.

Put simply, it’s about understanding your money, knowing what’s to come and planning for that.

‘There’s a famous cognitive bias known as the Dunning Kruger effect, which basically says that if we don’t know enough about a topic there’s a chance we’ll feel overconfident about it,’ says Dr Ghafoori.

‘So, if we don’t know enough about the intricacies of retirement or our finances, we might think ‘I can deal with it when the time comes’ ¬– and that’s dangerous because it prevents us from talking to the experts, increasing our financial knowledge and planning for this important stage of life.’

The earlier you start to take control and grow your super savings, the better.

A tool like AustralianSuper's Super Projection Calculator can give you an estimate of how long your super will last.

 

CALCULATOR: HOW FAR COULD YOUR SUPER GO?

 

‘Super is your money, and your choice of fund and mix of investments makes a huge difference to how you grow your wealth towards retirement,’ says Dr Ghafoori.

‘Taking some time to learn more about your money and finances is a great investment of knowledge that will have a major impact on your experience of retirement.’

 

READ MORE: HOW SUPER WORKS WITH THE GOVERNMENT AGE PENSION

 

4. Rediscover your self-identity

With so much of your life spent at work, like it or not, your job becomes part of your identity.

‘When we reach the end of our working life we need to find ourselves again, to a degree,’ says Dr Ghafoori.

‘When we move from one stage of life to another there are always questions like ‘What am I going to do? How am I going do it? Who am I going do it with? Where am I going do it? How long can I do it for?’

‘These are the questions that help you to start thinking about your future self in retirement, and the sooner you can answer these questions the sooner you’ll feel comfortable with that person in the future ¬– and that gives you elevated levels of confidence,’ says Dr Ghafoori.

 

5. Consider your overall wellbeing

While the focus is often solely on finances, your health (mental and physical) and social connections are equally important when it comes to retirement confidence.

‘If there’s a problem in these areas, we know it has a major impact on your retirement,’ says Dr Ghafoori. ‘You can be affluent, but if you have poor health and you’re not socially connected, you’re unlikely to have a good experience.’

Dr Ghafoori says it’s not just about the number of social interactions you have, but also the depth of your social connections that are important in preventing feelings of loneliness and isolation.

There are plenty of online resources that can help you plan with consideration to your overall wellbeing and sense of connection. For example, SuperFriend offers resources around mental health for people in pre-retirement and retirement.

‘Planning prepares you mentally and financially, helping you to build both your confidence and your set of resources to maximise the chance of enjoying your retirement experience,’ says Dr Ghafoori.

 

PLAN YOUR RETIREMENT

This may be general financial advice which doesn’t consider your personal objectives, situation or needs. Before deciding on AustralianSuper read the Product Disclosure Statement available at australiansuper.com/pds. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.

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