Although retirement may seem far away, it tends to arrive far sooner than most people expect. Plan early for retirement to increase the likelihood of enjoying your desired lifestyle after you stop working. This ensures financial security and peace of mind for you and your loved ones as you get older. With this in mind, let’s look at retirement financial planning, including what you need to consider and how seeking financial advice will drastically improve your retirement strategy.
How to plan for your retirement
Financial planning for retirement can feel overwhelming, so the best approach is to divide your retirement strategy into steps. Let’s look at each stage of the retirement financial planning process.
Determining your retirement timeline
The first step of retirement financial planning is determining when you want to retire. Naturally, this could change, but it’s important to have a general idea. The retirement age in Australia is typically 67. However, it can differ depending on various factors such as financial status, health condition, career decisions, and personal circumstances.
A retirement timeline also determines how much time you have to implement your financial plan. If you’re 30 and plan to retire at 65, for instance, you generally have more options and long term retirement planning. If you are 40 years old and plan to retire at 55, you may have limited time available. In this case, seeking financial advice can be helpful in order to develop a proactive investment plan.
Your retirement financial planning may be affected by when you can receive the Government Age Pension. If you were born after July 1, 1957, you can qualify at age 67.
Similarly, your retirement financial planning could be influenced by your qualifying age, i.e., when you’re eligible for the Government Age Pension (For people born after the 1st of July 1957 the eligibility age is 67)
Age Pension eligibility is also determined by:
- Residential status: being an Australian resident for a minimum of 10 years
- Income and assets: the higher your income and assets, the lower your pension – up until a threshold, after which you’re ineligible.
Assessing Your Retirement Goals
Next, consider your retirement goals: your ideal lifestyle and plans for all that hard-earned extra time and freedom. For instance:
- Do you plan to travel, and for how long? Will you explore Australia or venture overseas?
- Will you relocate? Will it be cheaper or more expensive?
- Which hobbies and interests will you pursue?
- Will you have an active social life?
Generally, the simpler your retirement plans, the less income you’ll need. While more active and elaborate retirement plans will cost more.
Evaluating Your Current Financial Situation
Assessing your present financial situation will reveal whether you’re on track to meet your retirement goals. And, if not, how you can refine your retirement strategy. This includes:
- Income: How much do you earn? Do you plan to increase your income, i.e., further education, professional development, etc.?
- Savings: how much do you have saved? Based on your current and projected income, how much more can you save for retirement?
- Super: how much is it worth, and what are your monthly contributions?
- Assets and Investments: what’s their total value?
- Insurance: do you have sufficient coverage for unforeseen circumstances that could derail your retirement strategy, e.g., income protection, trauma insurance, and life insurance?
Estimating Retirement Income Needs
The next step is calculating your retirement living costs. Your desired lifestyle will determine these, so it’s vital to consider your retirement goals beforehand. This could include:
- Basic living costs:
- Housing, property tax
- Clothing, household goods
- Health care
- Social life: hobbies, dining out, etc.
- Travel plans
- Supporting children, grandchildren, or other relatives
Estimating your living costs allows you to evaluate your retirement income options and determine whether they’ll be sufficient or if you need to make adjustments in advance.
Generally, your retirement income will come from a combination of:
- Your super
- The Age Pension
- Assets and investments
- Part-time work
Creating a Retirement Savings Plan
Here are a few ways to increase your savings and boost your available retirement income:
- Better budgeting: create a budget to reduce expenses, then save or invest the savings
- Make voluntary contributions to your super: regular small contributions will compound over time to add up to a significant amount
- Downsize your home: if your home is too big for your retirement needs, i.e., your kids have left home, you could downsize and save some of the sale proceeds. Better yet, you could add the freed-up capital to your super and subject to meeting the eligibility criteria
Managing Retirement Investments
If you haven’t started investing for retirement, consult a financial adviser to find the best investments for your situation. A financial adviser can help you lower risk and improve performance by reviewing your assets and suggesting changes.
Why should you get help with retirement planning services?
There are several reasons why it’s wise to seek retirement financial advice.
A financial planner can help you:
- Create a budget you can stick to
- Develop and refine your retirement savings plan
- Choose the most suitable super fund for your needs
- Discover retirement income options you didn’t know were available
Retirement Planning with K Partners, renowned Melbourne Financial Advisers
No matter your current financial situation, the skilled team of financial advisers at K Partners can help your plan for your perfect retirement.
Please note that all the while the information provided above is factual in nature, it’s also intended to apply generally, and to a broad audience. Subsequently, the information hasn’t taken your personal circumstances or goals into consideration.