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Retirement Planning Mistakes to Avoid

5 Common Retirement Planning Mistakes You Should Avoid

By planning and saving for retirement, most people can look forward to a rewarding life in their post-working years. However, it’s not as easy as it seems and many Australians fall short of their goals simply because they failed to plan sufficiently. If you want to avoid that from happening, here are some common retirement planning mistakes that you should aim to avoid.

Retirement Planning Mistake #1: Waiting Too Long to Start Retirement Planning

Retirement planning should begin as early as possible. The longer you wait, the harder it will be to achieve your goals.

If you are not at the beginning of your career, never fear, it’s not too late yet. It is possible for those who are already in their 40s to seek out professional superannuation advice, invest in a suitable investment portfolio and contribute regularly to benefit from compounding interest and growth.

Using a simple compounding interest calculation, let’s look at the difference between a 25-year-old and a 40-year-old who both invest $1,000 per year, earning an annual rate of return of 5% until they each turn 65:

  • The 25-year-old ‘s balance would be $120,800 by the time they turn 65. *
  • The 40-year-old ‘s balance would be $47,727 by the time they turn 65. *

Both are still making great steps towards achieving their retirement dreams, but as this example shows, the earlier you start, the healthier your final superannuation balance will be.

Retirement Planning Mistake #2:  Not Adding to Super

The superannuation system allows you to contribute additional funds to your superannuation account up until age 67 with no restrictions, or by passing the ATO work test if you are age 67 or over. If you have sufficient disposable income, it may be a smart strategy to make the most of this opportunity.

You can make both concessional and non-concessional contributions to superannuation.

Concessional contributions include:

  • Employer Super Guarantee Contributions.
  • Salary sacrifice contributions that you’ve arranged with your employer.
  • After-tax contributions you’ve made that you elect to make tax-deductible by completing the ATO notice of intent to claim a tax deduction form.

Non-concessional contributions include:

  • Personal contributions you make from your own money for which you do not claim a tax deduction (generally any money on which you have already paid tax)
  • Contributions you make for your spouse (or vice versa).

The superannuation system is one of the few tax-advantaged retirement strategies available to most Australians. In addition, your employer typically provides valuable employer superannuation guarantee contributions as part of your salary package.

Retirement Planning Mistake #3: Saving in the Wrong Account

The main reason people do not make meaningful savings is that they put their money into the wrong account. The biggest mistake people make is assuming that their savings account is the best way to save. But with a savings account, your money will usually not grow at an appreciable rate that will out-grown inflation.

If you want to achieve substantial savings for your retirement, then you need to invest at least part of your savings into a diversified investment portfolio. Why invest in a portfolio? Investment portfolios provide you with a greater opportunity to earn a higher return on your money, however, they also come with an element of risk.

If you are unsure where to start, it is best to seek professional financial advice on suitable investment strategies for your personal circumstances.

Retirement Planning Mistake #4: Forgetting About Taxes

In Australia, there is no tax deduction for investing your own money into a personal investment portfolio. To claim a tax deduction for a personal investment portfolio, the money must be in the form of a loan and the tax deduction comes from the interest payments you make to maintain the loan.

If you do not wish to enter into a geared investment portfolio but want to add to your retirement savings whilst also gaining a tax deduction, the simplest strategy may be to make contributions from your after-tax income to your superannuation (see above).

Retirement Planning Mistake #5:  Taking on Too Much Investment Risk

People who are unable to save enough for their retirement tend to take on more investment risks. This is because they are desperate to get more money so they can hit their retirement savings goal sooner. But this is not advisable as the increased risk means that you are more exposed to market volatility and more likely to incur greater losses. It’s better to be patient and let your money grow.

People who are well-off financially can afford to invest in riskier assets that are more likely to grow if they choose to do so – but this is not true for everybody. So if you do not have a significant amount of money to invest, then it is best to invest in a portfolio that reflects your risk appetite and is more likely to yield a regular income. You may be able to subsidise your retirement income through the Age Pension and other government support for retirees.

Planning for your Retirement?

Retirement planning is extremely important to achieving your dream retirement in Australia. But many of us don’t put enough effort into it because we think that we have enough time to get our ‘financial ducks in a row’. But the reality is that our lives are much shorter than we think, and we should not rely on our future lives to make up for our present negligence.

Planning for your retirement may seem like a daunting task, but it does not have to be. With the help of a reliable financial adviser, you can easily ensure that you avoid these retirement planning mistakes. That’s why Newcastle Financial Planning Group is here. We make it our mission to help you achieve financial success and security now and in retirement. Whenever you need retirement, superannuation or investment planning advice, we are here to help. Book your initial meeting to get started!


* Note: This calculation is a compounding interest demonstration only and does not take into account any taxes or superannuation account fees that may be incurred and affect the final value. Do not act until you seek professional advice.


  • https://moneysmart.gov.au/budgeting/compound-interest-calculator
  • https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Super-contributions—too-much-can-mean-extra-tax/?page=13
  • https://www.ato.gov.au/forms/notice-of-intent-to-claim-or-vary-a-deduction-for-personal-super-contributions/
  • https://www.servicesaustralia.gov.au/age-pension
  • https://www.servicesaustralia.gov.au/age-pension-payments-concessions-and-support?context=22526
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