DIY Retirement Warning

I am not convinced that the answer to people not planning for retirement, is more Do It Yourself (DIY) focus. Sure, it’s better than nothing, to use the calculators etc., but the problem with these is the placebo like effect of having run the calculator, and then your brain basically deciding you are done, and then you go back to whatever else you are doing, and spending.

Doing this with an Adviser (an Authorised Financial Adviser (AFA) who can advise on long term retirement planning), is better because the calculators are not the point, the calculators are just the overview.

The purpose is to identify the habits to change and where to put money, what to change etc. so that you get the better benefit of compounding interest, and do a bit better with your money each year.

This bit annoys me though:

Retirement planning is not a precise science, and people should ignore the big, scary numbers the money men and women sometimes claim you need for a comfortable retirement.

It is not a precise science, but you should not ignore the big scary numbers, but understand that a good planner will show it in context of what you need to do each year and each week. But, if you ignore the big number, and think “she’ll be right” then you are doomed to failure unless you have a happy accident.

The article mentions wildcards like the Auckland rates increases and Christchurch changes to insurance (though premiums did not double, but media is nothing but there for hyperbole), well that’s what a planner helps you with, a DIY calculator cannot.

The general process for retirement planning is:

1. Determine needed income needed in retirement
2. Determine savings needed to get there
3. Allow for inflation and other expected unexpected expenses
4. Plan for clearing the mortgage
5. Alter the budget and spending habits as needed
6. Sort the KiwiSaver and other products as needed
7. Set up Review plan

It’s easy, but it’s not simple. A good plan with solid advice will make the difference between retirement, and a good retirement.