Retiring soon? Time to reduce, review and switch your services

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Opinion

Retiring soon? Time to reduce, review and switch your services

I don’t want to try to teach anyone here with financial smarts how to suck eggs, but I do want you to take the opportunity – at the time in which your life will most benefit from cutting your cost of living – to reduce, review and switch.

You see, many of your core service providers see 60-somethings as bolted on to their old supplier relationships, and they don’t think they need to offer you great deals or even good services that suit your needs because they think you aren’t watching them. It’s time to take an axe to the excesses and make sure you only have services you actually need or want.

Take the opportunity – at the time when you will most benefit from cutting your cost of living – to run the ruler over your gas, electricity, and insurance.

Take the opportunity – at the time when you will most benefit from cutting your cost of living – to run the ruler over your gas, electricity, and insurance.Credit: Getty

The only loyalty you should have is loyalty to yourself, ensuring you get maximum bang for your buck, today. You should also be aware of the value of your data as you consider switching.

Here are some simple ways to cut your costs and reconsider where you spend:

Take advantage of rebates on gas and electricity

In each state, pensioners – and in most cases seniors – are eligible for rebates on electricity and reticulated natural gas. You’ll need to contact your gas and electricity retailers and provide evidence of your eligibility. Rebates are automatically deducted from your bill in most cases once you are set up in their systems.

Consider switching energy providers

Energy is a fiercely competitive industry in Australia. All of the energy companies are vying for your business and comparison sites that sell your data to providers have set up whole divisions around energy. When you go looking, it can be quite overwhelming.

It is good to be aware that the federal government has set up a website designed to help you understand how you can save money on your energy plans at energymadeeasy.gov.au. On this website you can compare plans and promotional offers on gas and electricity in every state, and you can search for deals relevant to you. You can compare deals side-by-side then choose who you contact directly.

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If you can, avoid the comparison sites. Your data is too valuable to give it to them so they can sell you on to others. Do your own research instead.

Review your bank and bank-related fees

As you venture into your pre-retirement and retirement years with the intention of paying down your mortgage, you become a very unappealing customer for the big four banks. Banks want something very different to what you want.

They make their money from interest on your mortgage and credit card debt, your $10 a month per account in bank fees and income from transactions and transactional data, which is used to target you for a lot of advertising!

And you don’t need an expensive banking relationship if you don’t have a mortgage, don’t out-spend your budgets on credit cards, don’t want to pay bank fees and don’t make heaps of transactions.

In contrast, it is likely that you want a bank that will pay you better interest on your deposits. Again, you won’t find this in the big four banks right now. At the time of writing, Westpac is only offering good rates on deposits to people up to the age of 30 if they hold a primary transactional account with them (banks want data to know when they can sell customers a home loan!).

Out today: How to Have an Epic Retirement by Bec Wilson, Hachette, $34.99.

Out today: How to Have an Epic Retirement by Bec Wilson, Hachette, $34.99.Credit: Hachette

If you’re over 30, there’s nothing for you here. The products completely leave retirees out of the picture, and likely will continue to.

One banking insider suggested to me that the big four banks might one day start incentivising older generations to switch their transactional banking relationship by offering them a better interest rate on cash management accounts, but be warned – they only want you if you bring your primary transactional account and all its juicy transactional data; it’s the future of banking.

The only other reason the big four banks want to stay in touch with you is for your relationship with your children. They might want to sell them a mortgage one day and it’s likely that you’ll have to go guarantor or help with the deposit.

So don’t be deluded by a long-term loyalty scheme – the only reason you need a bank from here, if you are in a healthy financial position, is to hold your cash and pay you interest, so I challenge you to go looking for one that wants you in this exciting phase of your life.

You might want to look at the offerings of one of the second-tier banks that want to celebrate you for saving your money and reward you with great interest rates such as AMP and Macquarie.

Consider cash-back websites and apps

Younger generations are having a field day on cash-back websites and having money returned directly to their bank accounts. And if you understand the rules of the game, you can choose to benefit too.

Cash-back apps and websites generally work in similar ways. You make a purchase by clicking through to the retailer’s website from the cash-back website or app. Each time you make a purchase this way, the cash-back app company receives a commission, and a portion of this commission is returned to you – straight into your PayPal or bank account.

Payments are not immediate, usually allowing approximately three months until payment in case you return the purchase. Setting up a cash-back account is free. And you just link your preferred bank account when you join.

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There are hundreds, if not thousands, of retailers attached to the two big cash-back sites in Australia: ShopBack and Cashrewards. Discounts vary by retailer. On average you can get about 7 per cent cash back on purchases, which adds up to a pretty penny over a year.

Weaning off your bank well before you switch

It’s tough to contemplate changing your core transactional bank account. I mean, what an inconvenience it would be to switch bank accounts after 20, 30 or 40 years – or would it?

The window where your goals change from paying off a mortgage to generating income from your hard-earned money is the most important switching window you’ve got, especially if your bank’s interest rates underperform. And the easiest way to break up with your bank is by using your mobile phone for payments, then, after a time, switch the underlying card that points to your mobile device – and you’ll barely notice.

Have you started using Apple or Google Pay on your mobile phone for all your transactions? Stop to think about how easy it would be to switch the underlying credit card or bank account underpinning your phone payment system if all your payments were already being processed through the phone app.

Always remember: you have to look after yourself first.

Cut down to one car

Cars are expensive to own and run, and not always essential if you are living in the inner-city or in a location with access to rideshare apps, like Uber, or taxis.

The RAC calculates the average cost of car ownership of a medium car in Australia is approximately $200 per week or $10,400 per year. If you have a second car and it is being used only once or twice a week to run to the shops, you might want to consider how you could use this $10,000-plus per year differently in your life. If you take 104 rideshare trips at $15 each throughout the year (two per week), it only adds up to $1560.

Reconsider your insurers

Insurance has changed a lot in the last ten to fifteen years. But the world has changed a lot too. Insurance is now a product that is priced using very sophisticated algorithms, based on risk data, so as a slightly older person your risks (and therefore prices) in some areas become elevated and in others, they decline.

You can take advantage of this when pricing new insurance policies. Or, at the very least, it might help you to understand why some policies are priced higher than others. Here are a few easy tips for where you might save:

Car insurance: When you retire, you may drive less. Almost all the big insurers offer a ‘drive less pay less’ style of policy. You’ll need to ask for it. It can drop about 30 per cent off the price of your car insurance policy.

You don’t need to be with a ‘seniors insurance company’ to get this type of policy. Most companies offer them now. Sometimes being in a pool of just seniors ends up costing you more because the whole pool is riskier and it’s better to stay with a mainstream insurer. Why not double-check?

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Home insurance: This product has become pretty homogenous among the big insurance companies. In fact, there are very few features that differ, so you are really pricing based on location, the policy features such as ‘flood cover’ and ‘excess’; whether a company offers more personal service; and the risk data on the pool of people insured by this insurer. So shop around. Know the features of the policy that are important to you and read the reviews for how their claims service delivers.

Prioritise your health insurance

Please don’t scrimp on your health insurance as you get older if you can at all manage to avoid it. I know far too many stories of people who have seen their quality of life go downhill dramatically in their early to mid-70s because they simply could not get through the waiting lists in the public system for hip or knee replacement surgery that would keep them mobile. And there are too many stories to tell about how awful it is to live without quality dental care when you age.

The public health system in Australia is pretty good for emergency healthcare. But it is appalling for dental and non-critical procedures. A health issue causing you chronic pain can go untreated for years without health insurance.

Health insurance is another industry that is priced on risk, so it is a very rare thing to see a policy advertised to older generations directly, as the older you are the more you are likely to cost the insurer money.

You’ll want to understand what you need from a health insurer and what they exclude from their varying levels of cover. Look out for the hospital level, ensuring cover for knee and hip replacement (prostheses) and theatre and intensive care fees. And extras, which normally include the important trio of dental examinations and treatment, glasses and contact lenses, and hearing aids and appliances.

Shop around on travel insurance

Travel insurance is trickier and more expensive post-Covid than it has ever been. That’s because it is priced on risk. And as an older passenger, you often pose a higher risk of making a claim to the insurer, particularly if you have health issues.

Most insurers consider individuals aged 75 or over to be a higher risk, and they charge higher premiums accordingly. Moreover, it can be almost impossible to find insurance over the age of 80 if you have health problems. This can cause people to avoid travelling to some regions of the world altogether.

My big message on travel insurance is to shop around. The big companies operating in travel insurance in Australia are Covermore, Insure & Go, Allianz and IAG (which underwrites NRMA and CGU). All offer good service and reliable claims by all reports, so it really is about risk and price for most people.

At the time of writing, some don’t offer Covid-cancellation cover, which will become less important over time but is still critical at the time of writing. Many tours and some countries require that you have Covid-cover to enter. Make sure you ask!

You really should buy dedicated travel insurance if you are travelling on domestic or international cruises and all international holidays. Your credit card travel insurance is not enough for most older people as they don’t normally cover you for lost, stolen and damaged items, or for pre-existing health conditions!

One exception exists – Commonwealth Bank has a very interesting travel insurance offering, provided by Cover-More, tied to their premium credit cards that has to be manually activated before you travel. It is worthwhile exploring this option if you have one of these credit cards.

This is an edited extract from How to Have an Epic Retirement by Bec Wilson | Hachette | $34.99.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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