So, you’re thinking about retirement. Congratulations! Looking ahead to a time after work can be as exciting as it is daunting. How can you make sure that you’re able to enjoy the lifestyle you want in retirement? What are the financial milestones you need to have achieved before you can retire?
The closer you get to retirement the more important it is for you to review your finances.
Three key questions you should be asking yourself include:
The answer to these questions can vary from person to person, so it’s usually a good idea to seek advice from a financial adviser who can review your situation and goals and put your retirement figures in focus. You can also use tools like retirement income calculators available online, however it’s worth noting that these often make generalised assumptions and may not provide the personalisation you need to make confident retirement decisions.
Beyond these three key questions, here are 12 other things worth keeping in mind when mapping out your retirement strategy.
Create a spreadsheet with all your expected retirement living costs including groceries and housing to healthcare and taxes. Working out all your fixed costs will help. It’s also worth including working out any travel plans you may want to do in the future, but also add a bit of a buffer for the rising cost of living (as a guide, CPI has traditionally grown at a rate of 1.4-2.8% each year in Victoria)
When working how much you need to retire, you need to make sure you have enough to last the desired timeframe (i.e. the length of your planned retirement) and consider if there will be any tax implications if you plan to retire before you reach age 65.
According to The Association of Superannuation Funds (ASFA), it’s estimated those who want a comfortable retirement need $640,000 for a couple and $545,000 for a single person. This assumes receiving a partial age pension.
ASFA says for a modest lifestyle income of around $28,254 p.a. for a single and $40,829 p.a. for a couple.
As an adviser, I usually suggest having 6 months’ worth of income tucked away as a rainy-day fund that can cover all costs in case of an emergency.
Consider different types of contributions such as Salary Sacrifice, member contribution, spouse contribution, depending on your circumstances such as age, income tax level and cash reserves. Speaking to an adviser about the right strategy for you is a good call when making superannuation considerations.
Retirement doesn’t necessarily have to mean you’ve given up work for good. It might be a time to consider focusing on your passions with a part time job that will top up your income and living expenses. It also gets you out of the house, keeps you busy and social.
Going from a full-time work routine to weekends without end can be a big adjustment for some. While you’re making your retirement plans, don’t forget to think beyond just the numbers and think about some the hobbies you might want to pick up and all the things you might not have had time to do before (within reason).
Staying active will help keep you healthy – both physically and mentally.
Personally, I will be joining social groups including travel clubs and cooking classes.
An adviser can help select the right retirement account, advise on investments, help with your budget and help you understand how you are placed. They can also help guide discussions around tax effective strategies including things like salary sacrificing, and assets you might currently hold outside of super like direct shares and discuss whether turning them into superannuation assets via in-specie transfer pre or post retirement is a path you should consider.
Taking a holistic view of your situation is a great way to minimise your tax liability, especially if you have a significant build-up of unrealised gain within your existing assets. Speaking to an adviser is always a valuable exercise – The Hopkins Group has a team of financial advisers available to answer all your retirement planning questions.
Look over your estate plan, your assets and liabilities upon possible incapacitation or death.
A living will (advanced healthcare directive) detailing your preferences with medical and power of attorney is a good thing to have in place, as well as a will to detail your wishes on how you want to divide your assets when you’re gone.
Life insurance is a good way to cover expenses and debt after your death but in saying that ask yourself, do you still need this insurance?
Is this insurance still appropriate? And do you have beneficiaries nominated?
It’s a good idea to review your policies with your financial planner when discussing your retirement strategy to make sure they continue to be the best fit.
Is there an employee healthcare plan? Are you getting regular check-ups? Are you looking at your fitness and nutrition?
Review your health insurance provider to see it is still appropriate, including reviewing your level of cover.
Will your home still be suitable as you get older and what do you need to consider if it isn’t? Do you have to move? Should you move closer to family? Will you still be able to move around in your golden years? Will your home loan be paid off?
Consider any government assistance such as age pension that may not be eligible due to your partner working
These considerations only really scratch the surface of things you need to consider before you retire – but you don’t have to consider these things alone! Speaking to a qualified financial adviser from The Hopkins Group is a great way to break your considerations down into manageable actions, but also to uncover what your unique retirement strategy might look like.
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