Are you confident with your retirement plans?

Written on the 10 February 2023 by Parkside InvestorPlus

According to a world-wide survey (including 600 in Australia), by State Street Global Advisors (released in 2022), involving 3500 workers, it appears over a third of Australians, have very low confidence in their retirement plans.

40% Australian workers had expressed little confidence in their readiness to retire and the concerning part is that this percentage had only changed marginally over the last 4 years.

64% indicated they would like to receive advice from their superannuation fund.

Most concerned were those on low incomes and those whose retirement was fast approaching.

The largest driver for such low confidence was the rising cost of living (inflation).

And couple this with the fact that many will enter their retirement with mortgage debt – rising interest rates will impact their post-work quality of life. [link to article mortgage debt in retirement]

The primary concerns are;

• Will whatever money has been accumulated last in the years to come?
• Have provisions been made for future aged car needs?

Also coming into play is the expected quality of life in the retirement phase – holidays, home renovations, discretionary spending etc.

In another survey by YourLIfeChoices Older Australians Insights Survey, 60% said they believed a person needed between $250,000 and up to $1 million in their Super fund for a comfortable retirement – with a vast majority (60%) saying they did not have those amounts.

When do people choose to retire?

Some key considerations include:

• Your current level of superannuation (this is your starting point)
• Do you own your home outright or is there still a mortgage attached to it
• Are you an empty nester
• Your lifestyle expectations – i.e. how much annual retirement income do you need – for a moderate, comfortable or luxurious lifestyle?
• Your eligibility for the Age Pension and how much to top up your retirement income

Sometimes the ‘need’ to retire may be out of your control, e.g. illness, injury, loss of employment.

However, if you are a pre-retiree and are starting to stress about retirement, then think about the following.

If as a pre-retiree you have never sought professional financial advice, then now is the time to do so.

Your financial planner will provide you with various retirement scenarios that allow you to start planning for that period of life.

Here are some ways your financial planner can help you to craft your life in retirement.

How to plan retirement as a pre-retiree

The first step in pre-retirement planning is to do a dry run of living on your anticipated retirement income before you retire.

In this case, you attempt to live on only what income you would get from your superannuation and any investments. If you discover you are coming up short, then you may want to put off retiring for a little longer.

The longer you can delay drawing on superannuation and investments, the better – your super balance will have a chance to continue building.

Then, work with your financial advisor on the following components of pre-retirement.

• What do you want to do after retiring? You might want to pursue another job in a different career field that you enjoy. You should also think about how you want to spend all your free time, from personal hobbies to traveling.
• Do you have a mortgage? If so, it’s best (if you can) to pay it off before retirement or at least refinance at a lower rate.
• Do you have enough money set aside? Most people tend to live between twenty and thirty years after retiring. Initially, you may have enough retirement income to survive, but you also need to consider inflation and the effects it will have on your future ability to meet your financial obligations.
• Where do you want to live? Many people want to remain in their current homes after they retire. However, as we age, our housing needs can and do change. Selling your home and downsizing into a smaller home not only reduces your housing costs but also could give you extra money to set aside and supplement your other retirement income.

Obviously, the earlier you start planning your retirement, the better the outcome and your life in retirement.

Finally, even though 64% of respondents in the SSGA survey said they would like to receive advice from their superannuation fund, a financial planner will provide you with independent advice and guidance in line with your retirement goals.

Parkside InvestorPlus can help you with all your pre-retirement and retirement planning needs.  Contact us for a no obligation consultation.