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Taking the time to plan your finances can help in retirement.
Taking the time to plan your finances can help in retirement.

Five ways to make sure your retirement finances are in order

When you retire, the first big shock to the system is the lack of a big regular income.

Seniors who might have been a bit carefree when it came to finances in their younger years - with a "she'll be right mate" attitude - might find that approach doesn't cut it when the regular income drops.

Savvy, a one-stop financial partner for a range of products such as car loans, bike loans, marine and insurance, has five tips to share to help make the most of the options available to you in retirement.

1. Cutting down on assets

Cutting or trimming assets can sometimes entitle you to more age pension from the government.

This may come in the form of selling unused assets or giving away money to children or grandchildren.

Buying funeral bonds to a limit of $13,000 can also draw down assets.

Centrelink may also be valuing your assets at their initial purchase price, not the agreed value. Since all assets depreciate, make sure Centrelink has taken this into account.

2. Buying new assets - what approach is best?

Like it or not, our cars won't last forever. If you last bought a car when you started working, it may be long overdue for an upgrade. Common features of new cars such as reverse park assist and lane change warning sensors add extra safety for drivers too.

According to research by Savvy, the average cost of a new car is $26,000 and many seniors are tempted to take out a reverse mortgage, which pays them with money otherwise locked in the equity of their homes. This can lead to adverse effects on pension entitlements.

"If you can afford to pay for a deposit on a car, a regular consumer car loan may be a better option than looking at a reverse mortgage," says Savvy CEO Bill Tsouvalas.

"The average weekly repayment for a car loan is about $130, so it doesn't break the bank over a five-year term," he says.

3. Manage finances in "buckets"

If you've heard the term "diversifying your portfolio" - it doesn't simply mean your shares but your finances in general.

"Financial planners often use a strategy called 'bucketing' where your most immediate needs are kept in cash while the remainder is tied up in growth assets such as managed funds or property," Mr Tsouvalas says.

"This 'bucketing' can ensure your retirement is comfortable and resistant to market fluctuations."

4. Aged pension benefits and your entitlements

You should regularly review your assets, shares, and other holdings as it may affect your aged pension benefit entitlements.

Sitting down with a financial advisor to figure out what you can squeeze out of your portfolio every year is a good start.

5. Phase in retirement instead

Stopping work "cold turkey" is a massive shock to the system - which is why some seniors prefer to phase in retirement instead. They keep working past retirement age in a part-time arrangement until they're ready to stop completely.

It's worth noting the first $250 of weekly income is not assessed by Centrelink.

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