Aussies including migrants, particularly retirees, are feeling the brunt of the cost of living pressures as they struggle to meet basic expenses.
According to Alex Jamieson, Australia’s leading financial advisor and founder of respected finance advisory firm AJ Financial Planning, many families are finding current conditions tough due to interest rate hikes and price rises. However, it is those close to retirement and those already in retirement who are being hurt the most.
“Retirees have retired, they don’t have the time or the capacity to keep working to make up for challenging times. They simply need to find a way to make ends meet on their existing retirement funds,” Jamieson said.
“It is a hard pill to swallow, especially when your money-making years are behind you. Unfortunately, many people are having to dig into their retirement savings more than they would like to get through.
“The big question many retirees are facing is – am I going to have enough money to live out my life? For those who are planning for retirement, things are getting more difficult. They need to completely review and change their expectations.”
Jamieson added that while there are different approaches to retirement, the desired outcome is the same. People just want enough money to enjoy their retirement without running out of funds.
“If you are wanting to exhaust your savings and retirement funds over the retirement period, it is first important to run a Monte Carlo projection, which provides a probability of up to 90 percent accuracy of what might be possible to determine your maximum income levels in retirement, with the view to exhaust the capital base and utilizing the worst-case scenario,” Jamieson said.
“This provides the guard rails around the strategy so that you don’t outlive your capital over your lifetime, which would place you in a vulnerable position.
“The difficult element when running such a simulation is understanding how long you might live and utilizing life expectancy tables, combined with your current health position plus also the family health history can provide one with some guide on what you might expect.
“It is important when looking at an asset declining strategy, that statistical probability models are properly adopted to ensure a successful execution of the strategy.”
Jamieson emphasized that many people have already done this and have planned and saved accordingly. However, unexpectedly high inflation has undermined the plan.
“My strong advice is to talk to someone about a recalibration of the plan. If you need to make changes, do it. You may even need to think about coming back out of retirement,” he said.
“The most common reasons retirees run out of money are due to overspending, having to deal with unexpected issues, or not planning properly.
“Don’t leave things too late. Act now and act quickly. Retirement is too important to get wrong.”
About Alex Jamieson
Alex Jamieson is the founder of Melbourne-based advisory firm, AJ Financial Planning. With a firm belief in responsible investing, Alex crafts investment portfolios for clients that not only meet their financial objectives but are also sustainable and match their ethical values.
A highly respected financial advisor, Alex is considered one of the country’s leading experts on all matters of financial planning, investing, and retirement.