Five financial mistakes to avoid in your 60s

Regardless of your earlier financial choices, the financial decisions you make in your 60s will have a profound effect on the rest of your life. Our financial advisers, including me, are in a great position to see those who make some excellent decisions at this critical phase of life. Unfortunately, we’ll often see people who have already made mistakes during this decade that they’ll never recover from. To help you stay on the right track, here are five financial mistakes to avoid in your 60s which should all apply regardless of the decisions you’ve made (or not made!) earlier in life.

  1. Holding savings in a bank account and/or term deposits without good reason

Cash held in savings accounts or term deposits is a great idea to cater for emergencies, or when sums are needed within the next year or two. Holding cash for any longer is widely accepted as being unwise for your long-term financial well-being, as opportunities to invest and grow your wealth are missed. When in your 60s you’re either nearing retirement or are already retired, so holding too much in savings accounts and terms deposits won’t make the funds last as long as other investments will. Worse still, term deposits and savings accounts aren’t guaranteed by the government anymore, so your funds probably aren’t even as safe as you might think.

  1. Being asset rich and cash poor

Longer life expectancies, increased property values, and the rising cost of living means that an increasing number of Kiwis are finding they’re “asset rich but cash poor”. These people typically have valuable assets (usually their own home), but limited cash on hand or other meaningful income to give them the choices, security and freedom that their wealth should provide.

This issue can usually be avoided by:

  • Conducting thorough retirement planning, and/or
  • Downsizing to a smaller home sooner rather than later. This can unlock the value held in the family home and reduce expenses such as upkeep, rates, and insurance. For many, downsizing will also suit their lifestyle, as they no longer need the spare bedrooms for children who have moved on, no longer want to upkeep outdoor areas, or may be slowing down and starting to struggle with stairs.

Interestingly, many residential property investors are also in the position of being asset rich and cash poor. This is because the very low yield on such properties doesn’t provide enough of an income relative to the value tied up in the property – especially after paying associated expenses. Once again, this can be rectified or avoided by exploring other investment options.

  1. Not understanding risks and taking steps to protect your assets

If you die without a will, the law says who is entitled to share in the estate. For example, our financial advisers frequently encounter situations such as:

  • Retired or retiring couples with children who aren’t aware that if one of them dies without a will, the spouse will only receive the personal chattels plus $155,000 (with interest) and a third of anything that’s left. Everything else held in the name of the deceased is divided among the children. If any of the children have passed away, their children receive their share, and so on for each generation.
  • Individuals, such as widows or widowers without children who aren’t aware that if they die without a will, everything they own will become the property of the Government!

Not only that, but have you considered what will happen if you become injured or mentally incapacitated, such as through illness or an accident? This is what an enduring power of attorney is for.

Spending some time understanding the risks you face, and planning for them, can offer you peace of mind knowing that your loved ones will be taken care when you pass away or of if you’re incapacitated.

  1. The retirement splurge

Don’t get me wrong, there is absolutely nothing wrong with splurging some of the funds you’ve sacrificed and worked to accumulate for your ‘golden years’. However, all too often we come across people who have just spent all their KiwiSaver funds to do something like landscape the garden, or buy a new car, or take a holiday somewhere before they’ve calculated the implications for their retirement – and whether the spending truly reflected the retirement goals (and other goals) they wanted to achieve.

As is often the case, some simple planning, including identifying what your life and financial goals really are, will go a long way to preventing this issue. You can either do this yourself or have a professional financial adviser assist you. Whatever you do, unless you want to be forced into working well into your 70’s, it’s a great idea to avoid splurging funds before you’ve done the analysis to ensure your spending decision is a wise one.

  1. Being too trusting of family and ‘friends’

You don’t have to search far to come across plenty of stories about people who are supposed to be enjoying the best years of their lives in retirement, and instead this has been ruined by placing too much trust in someone who was close to them.

In other cases of misplaced trust, the elder, possibly after many years of having their estate in order, is persuaded to change their will and/or enduring power of attorney to put all power in the hands of someone who wants to take advantage (or who may want to take advantage in years to come).

Both instances are often termed ‘financial abuse of the elderly’ and are a lot more common that you may think. Sometimes it even involves someone in their 60s or older getting into a whirlwind romance with a much younger person! Whatever the circumstances, ensure you think through all matters carefully, take appropriate advice from legal and financial specialists, and then implement what’s needed.

The bottom line

What you do in your 60s will have an immense impact on how you spend your golden years. Through this decade, you’ll be doing well to avoid the financial mistakes of:

  1. Holding savings in a bank account and/or term deposits without good reason
  2. Being asset rich and cash poor
  3. Not understanding risks and taking steps to protect your assets
  4. The retirement splurge
  5. Being too trusting of family and friends.

Click here to find Milestone Direct on Eldernet.

This article has been contributed by Joseph Darby, CEO and authorised financial adviser at Milestone Direct Ltd. This article first appeared on the Milestone Direct website. The views and opinions expressed in this article are those of Joseph Darby and not necessarily those of Milestone Direct Ltd. The views and opinions expressed in this article are intended to be of a general nature and do not constitute a personalised advice for an individual client. A disclosure statement relating to Joseph Darby is available, on request and free of charge.

About Milestone Direct Ltd

Milestone Direct Ltd
Milestone Direct Ltd is a full-service financial advice firm with a focus on retirement planning, wealth management, and ensuring your funds don't run out before you do. Milestone Direct is unique, with; no product provider ownership, no quotas, and all financial advisers are paid a salary instead of commission. Milestone Direct Ltd are already trusted as the official financial advice provider to organisations such as the NZ Defence Force, so you can trust them too. Call now for a free and no obligation initial consultation, toll-free 0508 645 378 or learn more at: