19 Jan 2018
Have you got the back-to-work blues already? Are you dreaming about your next holiday? Well, it may be time to start planning for retirement. Even if it's still a few years away, the sooner you start planning the more organised you will be when the time comes to have that final day at work.
Here are our top 7 tips for retirement planning:
1. Consider when you would like to retire
The average Aussie man is likely to live until 80 and woman to age 841. If you leave the workforce at 60 that’s over 20 years in retirement, you will need to consider if you have enough retirement savings to fund your lifestyle for two decades.
Early retirement may sound like a dream, but many people are actually finding they’re not ready to fully retire at 60. There are many different retirement strategies to consider, like reducing your hours or transitioning into a part-time/job-share role.
2. What would you like your retirement to look like?
How do you picture your retirement? Maybe it’s an endless round-the-world cruise, or simply relaxing on the deck of your new seaside home. What about finally writing that novel or indulging your green thumb with a small farm plot? Take some time to think about how you’ll spend your days and don’t forget to talk it through with your partner and ensure that you are both working towards your ideal retirement.
3. Calculate what your ideal retirement will cost.
Once you have a picture of how you will spend your retirement years, you can start to build a realistic budget. Work out what assets you have (or will have by retirement age) and what you are likely to spend money on. You might think you’ll have fewer outlays than you do now, but there could be costs you hadn’t counted on, like a few additional medical expenses.
The best retirement plans also take into account any purchases that will need to be made (such as a new home, a boat or travel expenses) and the legacy you’d like to leave behind for your loved ones.
4. Think about how will you fund your retirement
Whatever your retirement dreams, you will need money to fund them. There are many different ways to do this, but most Australians will rely on their superannuation as their primary retirement investment.
Take a look at your superannuation account and work out whether you will realistically have enough saved by your desired retirement age. If not, it might be time to consider making extra voluntary contributions. Consolidating multiple super accounts is also a good way to reduce unnecessary fees which can erode your balance.
5. Find out what you are entitled to
Just because you’ve reached pension age (between 65 and 67 depending on when you were born) this doesn’t mean you will automatically qualify to receive government assistance. There are a number of eligibility requirements and income tests that are applied, like assessing the value of assets you own and how much your spouse earns.
It’s a good idea to look at your pension eligibility ahead of time, and work out whether you can expect a full or part payment. Getting expert retirement advice to help you restructure your assets could also be an option to help increase your eligibility.
Of course, there are other entitlements you can claim as you get older, such as a Senior’s Card and Senior’s Health Card. These can ease the financial burden across all kinds of expenses, like medical services, transport, insurance, etc.
6. How long will you stay in your home?
As you age you may find you can’t do all the things you used to love to do. Mowing a half-acre block might be easy in your 50s and 60s but as you grow older that chore may become more difficult. Retirement could be the perfect time to downsize your home, which in turn may free up some funds.
It’s also important to talk to your family about how long you intend to live in your own home and if/when you want to transition into a retirement village or other assisted living facility. Consider putting aside funds to cover aged care fees so you can reduce the burden on your loved ones.
7. Planning for the future
It’s not nice to think about, but planning ahead can make all the difference to your family when the time comes to say goodbye. Take the time to have an honest and open conversation with your loved ones about how they can support you at the end of your life. What medical treatment are you prepared to undertake? What legacy would you like to leave? Do you have insurance to help your loved ones pay for your funeral? Do you have an up-to-date will?
Setting up your end-of-life plan means you can get on with enjoying your retirement without those niggling worries.
Leaving the workforce for good is a momentous milestone and a well-thought-out retirement plan will ensure that it is a life moment worth celebrating!