The Unexpected Realities of Retirement Planning

Written on the 4 April 2024 by Parkside InvestorPlus

Richard had been dreaming about retirement for years - golfing, traveling, and spending quality time with his grandkids.

But as his anticipated retirement date crept closer, he found himself filled with trepidation rather than excitement.

His previous fulltime job wasn't just a pay cheque, rather, it was his identity and his community.

Who would he be without his daily work routine and the satisfaction of making a difference in his profession?

If Richard’s story sounds familiar, you're not alone.

Retirement represents a seismic life shift that goes far beyond just financial considerations.

Let's explore some under-discussed realities to prepare for this transition:

The Emotional Side of Retirement

According to the 2020 Australian Bureau of Statistics Retirement and Retirement Intentions report, one of the top factors influencing the decision to retire was "personal reasons."

For many, a job provides social connections, a sense of purpose, and self-worth.

Retiring can disrupt all of that.

Experts recommend exploring new hobbies, volunteering, or even working part-time to ease this transition.

Health

At the forefront the same ABS report listed "own ill health or disability" as the second most common reason for retirement, highlighting how health issues can derail even the best-laid plans.

Not only can poor health force an early retirement, but it can also place immense physical, emotional, and financial strain during those retirement years.

Long-term care

Preparing for potential long-term care costs is critical.

Lifespan miscalculations in a phenomenon called "longevity risk," the 2020 Retirement Income Review found those aged 55-64 underestimated their life expectancy by almost five years on average.

This miscalculation can lead to running out of savings too soon.

According to Challenger's 2022 Life Expectancy data, a 65-year-old Australian male can expect to live until 88, while females have a life expectancy of 90.

Building a financial plan that accounts for potential longevity is wise.

Delaying full-time retirement

The part-time solution of continuing some form of paid work can be a helpful bridge, maintaining routine and supplementing income/retirement savings.

Fortunately, the Age Pension system allows some earnings without reducing payments through income testing thresholds and the Work Bonus scheme.

By being proactive about the non-financial factors of retirement, people like Richard can approach this life phase with their eyes wide open and develop strategies to make it as rewarding as they had envisioned.

A holistic plan covering income, health, social connections, and purpose is key to a fulfilling next chapter.

If you’re ready for retirement and not sure of your options or if you are a retiree and wanting more positive outcomes in your retirement phase, contact us at Parkside InvestorPlus at (02) 9899 4899.