Diary of a self-funded retiree

Welcome to the first of what will be a regular diary update about the steps that my wife and I are taking to prepare for retirement. 

The idea for this diary came to me when my wife and I were in Europe recently visiting relatives, including my dad, who had just turned 99, and our siblings. We have a lot of friends in the UK who have just retired - most with a company pension topped up with the UK government pension (which is not means tested).   

One question that came up a few times was how much of a pension do we get in Australia? When I told them that we effectively get a lump sum, which we have saved ourselves (with some tax incentives), they wanted to know how that converts to a regular income in retirement.  

That got me thinking...while Australia has got a great system for making sure people save for their retirement, there's not much guidance on how we should invest and spend it when we do retire. 

This diary will be a summary of how my wife and I have decided to invest and spend our retirement pot, with plans to make it last.  

About us 

I am the Head of Funds Management at InvestSMART, a role that doesn't involve making investment decisions but ensures all our funds are compliant with regulators, and that portfolio managers do what they said they would do. My wife had a career in the charity sector, which didn't pay well but gave her great job satisfaction. She was left some money from her parents, which she used to top up her super. 

We own our home outright and my wife was left a share in a house in Spain with her brother and sister. We have a self-managed super fund (SMSF) and our balance is high enough for us to fully self-fund our retirement.

Below are our super assets, in broad allocations, shown as percentages: 

• Global equity: 38% 

• Cash: 26% 

• Defensive: 19% 

• Domestic equity: 16% 

Diary entry 1: Simplifying my financial affairs 

As I get older, I have tried very hard to simplify my life. I outsource the pool and garden maintenance, I get things fixed in the house quickly, so they don't sit on an endless "to do" list and I get to spend more time on things I enjoy.  

Simplifying life is especially important when it comes to financial matters as you approach retirement. When I started this exercise about six months ago, we had four credit cards, four debit cards, five bank accounts, a couple of super accounts, and an undrawn offset loan secured against our home.  

I have since closed three credit cards (one by mistake, which I will come back to later), closed two debit cards and merged two bank accounts.  

One corporate super account has a low-cost life insurance policy which I am about to cancel. Cancelling life insurance after paying premiums for more than 30 years sort of sticks in the throat, and I worry that the day after I cancel, I will be diagnosed with a terminal illness. However, the reason I took it out was to pay off the mortgage, which has now gone, so why keep it? Premiums go up every year, and there is enough money in our SMSF to give my wife a good lifestyle.  

When the life insurance is cancelled, I can roll the balance into my SMSF and hopefully reduce admin fees and simplify the investment decisions.  

The various bank accounts have arisen out of living in different countries in the past, so closing those with income or outgoings is relatively simple (I even discovered some small balances I had forgotten about).  

I have kept a high interest online bonus saving account as the rate is much better than what my major bank pays, even though I have banked with them for 34 years. 

We had a multi-currency debit card with a big international bank, which was great for travelling in Europe, the UK and Switzerland. I have changed this to one of the international online FinTech solutions, as the app is very easy to use and I can add and withdraw money with one click. My wife used the card in India last month with no issues at all (and at attractive exchange rates).  

Then there were the credit cards. One card was easy to cancel as it was never used. The other I cancelled because it started charging a monthly fee and I thought I would just get another one. That's when I encountered my first age-related problem - it turns out that card issuers don't like giving credit cards to people who might not be earning an income in the near future. It's a similar issue with getting a home loan - once you are close to stopping work, then lenders don't think you are a good credit risk.  

My top tips 

• Spring clean your bank accounts. Close any that you no longer use and make sure that you're getting the best possible rate for your savings. 

• If you have more than one super fund, consider consolidating them to save on fees. Keep in mind, though, that leaving a fund could mean you lose your insurance cover and you might not be able to get the same cover. This may not be an issue if you think you no longer need life insurance. 

• Revisit your life insurance. Think about whether you should potentially reduce the sum insured or cancel it altogether. 

• Make sure you have all the access to credit you think you might need when you're retired because it can be hard to get new credit cards or loans approved. 

What's next? 

In future diary instalments, I'll cover the following issues we have thought about and made decisions on: 

• When and how we might rebalance our portfolio for retirement and what to invest in   

• How much we can spend in retirement - doing a budget 

• How we keep healthy to keep our health costs low 

• How much can we afford to help the kids  

• How to keep engaged when you stop working 

• How much can we help with the grandkids' education 

I hope you will get something useful in each instalment of my diary - even if it just gets you thinking about what you might need to do now to have a comfortable and simple retirement. 

Diary entry 2 will be published on 27 March 2025.