1. Not having a vision

The first mistake is expecting your ideal retirement to magically fall into place without any planning. Like any major life transition, it requires a bit of forethought and a solid financial strategy.

Ask yourself what you want out of your retirement years. Many people take to travelling and pursuing all the hobbies that they had long dreamed of but never had time for, while others are content to lead quiet lives devoting attention to their homes and families.

What you decide will then inform how much money you’ll need. If it turns out there’s a gap between the amount you have and what you should have, look for ways to make up the shortfall.

That might involve topping up your super in the few years leading up to retirement so you’re in a better position once you officially hang up your hat. And if you plan to sell the family home and move into a smaller one, there’s also the option to use some of the proceeds of sale to make a downsizer contribution into your super.

2. Underestimating inflation 

Confident as you might be about your retirement plan, it won’t be worth its salt if it doesn’t factor in inflation. Say you plan to live on $4,000 a month in retirement. That might be more than enough to meet your needs in the early years, but fast forward 10 or 15 years and that same amount may not stretch nearly as far.

3. Underestimating how long you’ll live

One of the biggest (and most consequential) variables in retirement planning is how long we’ll actually live. While many people rely on average life expectancy statistics for guidance, we should remember these are neither static – they can increase over time as living standards improve – nor predictions.

To put it another way: don’t assume that you’ll only need to fund 20 years of retirement. If you’re planning for a retirement that lasts until age 85, your finances might be woefully unprepared if you wind up living into your 90s or even hitting 100.

4. Getting the timing wrong

The timing of retirement isn’t always up to us. Some people continue working out of necessity – whether to boost their super, clear debts, or ride out a down market – while others are pushed into an early retirement because of illness or redundancy.

But then there are those who put off retirement out of uncertainty. They might not have a good idea of how much super they need and insist on working longer than they have to ‘just in case.’ Or there might be some mistaken beliefs at play.

One misconception that’s unfortunately common is that you can only retire once you become eligible for the Age Pension (which is typically age 67). But the truth is your super can be accessed much earlier than that. Don’t let misunderstandings like these cost you valuable years you could be enjoying not working.

5. Leaving your super in the accumulation phase

When you reach retirement age, there are two main ways you can receive your super: commencing an account-based pension or withdrawing it as a lump sum. Some people, however, leave their super in the ‘accumulation’ phase despite ticking all the boxes necessary to access it.

What they may not realise is that doing this has big tax implications. Any investment earnings in the accumulation phase will continue to be taxed at a maximum rate of 15%, unlike an account-based pension where investment earnings are generally tax-free. In other words, you could be giving up a key tax advantage without realising it.

6. Not taking advantage of your entitlements

For those who qualify, the Age Pension can be a valuable supplement to your super income, but it’s not something you can just set and forget. Your eligibility and the amount you receive depends on your income and assets, and these can change over time.

One thing to keep in mind is that Centrelink doesn’t automatically depreciate lifestyle assets like cars, boats or caravans, so their reported value can become inflated as the years go on. If you don’t update their current worth, you might wind up receiving less Age Pension than you’re entitled to.

7. Being too frugal

A surprising number of retirees pass away with most of their super untouched. This might come down to a desire to leave a large inheritance or an inability to shake the sense of scarcity that’s followed them throughout life. Whatever the reason, it should be weighed against the very real risk of squandering your golden years.

After all, spending within your means is admirable, but you don’t want to overdo it and deprive yourself of all the things that make retirement worthwhile. Think about working with a financial adviser to create a plan that occupies a sensible middle ground between over- and under-spending.

Retirement often forces people to put their spending habits under the microscope in ways that they didn’t during their working years. While you might find that you’re not spending as much in some areas, there’s every chance that new expenses will crop up. Here are just a few that you might encounter.

Boomerang children

Whether they’ve moved back home or never actually left in the first place, it’s common for young adults to be living with their parents these days.

While this might be a welcome development, it often means larger grocery and utility bills (unless, of course, your children are able to chip in).

Assisting your children in other ways

Even if your children have left the nest and show no signs of wanting to return, there’s always a chance that you’ll be asked to provide for them in other ways. That might mean paying for weddings, uni fees, and even chipping in once they have children of their own.

Perhaps the biggest one, however, is helping them to buy a home. Home prices have risen to eye-watering heights, and depending on how much help your children need to get a foothold in the market, your generosity could have a material impact on your retirement.

Providing for elderly parents

It’s not just your adult children you might be called on to assist. Australians are living much longer than they used to, and if your elderly parents are still alive they might need support too. This might mean letting them move in with your family, hiring a carer, or making senior-friendly modifications to their home.

Divorce

For many retirees who go through a divorce, the financial repercussions are sometimes greater than what younger couples experience. That’s because older divorcees generally have more to lose in divorce settlements and less time to do the difficult work of rebuilding their financial lives. Loss of the family home can also be difficult, especially considering how unfriendly rental markets can be these days.

Higher than expected inflation

Even low rates of inflation can have a large impact on the purchasing power of your money over time. If high inflation strikes, it could force you to cast aside a lot of the plans you made leading into retirement. And if recent history has taught us anything, it’s that periods of high inflation can persist for much longer than governments, central banks and everyday people are comfortable with.

Unexpected medical costs

Medical expenses tend to increase as we age, and while the more routine healthcare costs (e.g. medications and visits to specialists) might be easy to manage, a sudden injury or diagnosis of serious illness could easily throw your finances into disarray.

Aged care

Even if you had plans to “age in place” instead of entering aged care, life can throw you a curveball and force you to change your mind. The good news is that there are residential aged care options that are relatively low-cost (and financial assistance from the government is available if you’re eligible). However, you might prefer a more well-equipped facility with all the bells and whistles, which can cost significantly more.