If you can, try to appropriately manage your expenses in retirement to keep off the Age Pension for as long as possible
Don't rule out aged care as an option, you may need to access these services at some stage
Planning for your retirement is vital, otherwise, you will have fewer options and flexibility in situations you face
Retirement requires a lot of planning, both financially and lifestyle-wise. Going from a working career to having nothing to fill your day can be a big change.
And it can be quite stressful realising you don't have a steady income coming in, and are now paying your expenses straight out of your superannuation and personal savings.
Because there are so many perceptions around what retirement life is like, it has caused a bunch of misconceptions about retirement to bloom. Below we debunk five common myths about retirement.
Myth 1: "I don't need to worry about my retirement savings, because the Age Pension is there if I need it"
While you should always be reassured that the Pension is available if you run out of your own money, going onto the Age Pension should only be a last resort.
Being on the Pension can completely change your lifestyle. If you have to rely only on the Government fortnightly payment, you would only be able to lead a "modest" lifestyle.
The Age Pension even falls under what the Association of Superannuation Funds of Australia (ASFA) consider a "modest" lifestyle. The day to day expenses can be covered on the Age Pension, but it can become a struggle if larger expenses appear, like sudden car troubles or broken appliances.
That also means no extracurricular activities, payments for big-ticket items, or overseas travel. It would very much reduce your ability to pay for anything outside of your most necessary expenses, such as food or transport. Any small leisure activities you do may require budgeting to do so.
There are a number of other factors that can impact you financially as well that you need to be careful about.
For instance, if you are entering retirement with a mortgage or debt, this can either severely impact your retirement savings, resulting in you accessing the aged pension sooner, or can eat away at your Pension, as Centrelink does not consider your home in your Asset Test, so they don't count your mortgage either.
Read our article on preparing for retirement life on the Aged Care Guide.
Myth 2: "I don't need to transition into retirement, I know I will love not working!"
Most older Australians who retire and don't plan for their retirement tend to be shocked by how much their life changes.
It can be mentally quite taxing for those who retire and don't plan, as a lot of their personal identity is tied into their career. Once they don't have a job, they are struggling to find things to fill their time.
Taking the time to plan your transition into retirement can be a lifesaver, as it gives you time to mentally prepare and get all your ducks in a row, so you know exactly what retirement is going to look like to you.
Additionally, people are living longer than ever before. You are not planning for five or ten years in retirement, you are more so looking at a possible 15-20 years in retirement. That is a lot of time and you want to make sure you won't run out of money!
You need to be prepared for not only the day to day activities, but also any big financial purchases you intend to make, like buying a caravan or travelling overseas.
To learn more about transitioning into retirement, read our article on the Aged Care Guide.
Myth 3: "I don't want aged care services, so I don't need to plan for it"
In your older years, it is more than likely that you will require some form of aged care service to help with any issues you are having or increasing care needs.
Saying no to aged care services, including help at home or community care, and not planning for potential future care needs will mean you will not be prepared for any health problems that arise and ways to deal with it.
Aged care services can be expensive and should always be considered in your retirement plan so you are not blindsided by the cost.
It is also important to note that in most cases, receiving assistance at home will keep you in your house for longer.
Not planning for potential increased care needs or aged care services could mean the decision is taken out of your hands if there is an emergency.
Read our article about planning for a secure retirement on the Aged Care Guide.
Myth 4: "Once I retire, my expenses will be less"
Actually, many new retirees are likely to see their expenses rise. There are a lot of different factors that will contribute to the change in your lifestyle.
Namely, you have left work, which was a big source of your income. Now that you no longer work, you have a lot of free time to kill. And what do people tend to do when they have free time? Spend it doing something they love - and that usually costs money.
Whether it be travelling around Australia or overseas, or spending it on experiences, food, books and clothes, your expenses will likely increase as you live the retirement lifestyle.
Some people want to use their retirement to do the things they have always wanted to do around the house. It could be an upgraded kitchen or a newly refurbished outdoor living area. These upgrades are not cheap.
Additionally, if you are wanting to age in place, you may need to start putting in mobility aids, like handrails around wet areas, to assist you at home and keep you there for longer.
Budgeting is vital at all points in your life, but for retirement, it can be crucial and prevent you from going on the Age Pension earlier than expected.
Myth 5: "I can plan my retirement by myself"
Planning your retirement is a big job. You need to consider your personal lifestyle, your financial situation, your future care needs, extra health expenses, accommodation, estate planning, and so much more.
It can be a really overwhelming process if you don't know what you are doing, as well as stressful because you need to face the possibility that you could become sick or even die.
If you don't plan your retirement correctly, you will have fewer choices and options to choose from during emergencies or financial situations.
The best expert to talk to about your retirement is a retirement planner or financial advisor, as they have knowledge in these areas and can make sure you are prepared for all problems retirement brings and organise an appropriate retirement plan that best fits the lifestyle you want to lead when you retire.
What myths about retirement life have you heard that you would like debunked? Tell us in the comments below.