Have you planned for a successful retirement?

Written on the 6 June 2022 by Parkside InvestorPlus

Retirement – it’s either your Holly Grail or the moment you’ve been dreading all your working life.

For those in the ‘dreading it’ camp, typically it comes down to one if not both issues;

1.       What am I going to do with myself?

2.       Do I have enough saved up to enjoy a decent lifestyle?

While early retirement is a goal for many, there are many factors that determine if this is possible.

In Australia, there is no such thing as a ‘retirement age’. 

Nor are there any laws that dictate when you can and must retire.

This means, you can retire when you want.

Having said this, statistics show that people, in general, choose to ‘retire’ between the ages of 62 and 65 – presumably to allow them to live a quality level of life while still being mobile and healthy for some time to come.

So, what determines when people choose to retire? 

Some key considerations include:

·       Your current level of superannuation or other financial resources (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

Benjamin Franklin once said, “If You Fail to Plan, You Are Planning to Fail”

The retirement phase of your life is no different.

The problem is that many Australians approach retirement very much underprepared.

Statistics show that less than 45% of Australians, under the age of 40, feel they are prepared for retirement.

How much income will I need in retirement?

The Association of Superannuation Funds of Australia (ASFA) reports regularly on the annual cost for singles and couples to achieve either a modest or comfortable lifestyle – while the numbers change on a regular basis, one thing is sure, given inflation has now reared its head, our cost of living has started to creep up.

In order to live a modest or comfortable lifestyle, you will need;

And while there are ways of stretching your retirement dollar, there are many actions you can undertake to ensure a successful retirement.

Here are some practical and pragmatic steps you undertake well before you reach retirement to ensure those wonderful years are as stress free as possible.

Fully understand your finances and financial goals

The first step in planning for your retirement is to have a clear understanding of your debt situation, income, assets and ongoing expenses.

How much income you need to retire on depends on your lifestyle aspirations as per the table above, or more!

Start saving for your retirement

Simply relying on your employer’s super guarantee of 10% may not be enough, although, this rate will go up.

Salary sacrificing your pre-tax income into your super fund offers substantial tax benefits, with amounts taxed at 15 percent – far lower than the tax on employment income.

Obviously, it’s best if you can enter your retirement phase as debt free as possible.

Pay down high-interest debt.

Save tax refunds and bonuses.

Ensure you have adequate health insurance – recent research estimates that an Australian couple will face yearly healthcare costs of between $4,975 and $9,900 in retirement. [link to article have you planned for aged care in your retirement]

Retirement trial run

Even if you're in the group that's looking forward to their retirement, you could find that it's not all that it's cracked up to be when you do get there - the reality has not met the expectations.

Just as you might take a car for a test drive before deciding on buying it, why not take your retirement out for a test drive?

Finally, if you haven’t already, make sure you’ve engaged a reputable, trustworthy, and experienced financial planner. 

Your financial planner is your financial coach – they will make sure you stay on track with your financial goals and that you are financially, mentally, and emotionally ready for retirement.

Parkside InvestorPlus has guided clients into, and in, their retirement with the minimum of financial and emotional stress by putting in place practical and financially sound strategies.

Contact us or call us (02) 9899 4899.