The key to a successful retirement is having a solid plan. The decisions that you make now could affect your financial future, so we’ve put together this brief list of 5 considerations that you need to make before you transition to the next phase of your life in order to be able to retire on your own terms.
1. Are you ready for retirement?
The issue is that it’s important that when you “retire”, that you retire to something, not from something. If you have a retirement dream, one that will keep you stimulated and happy, one that will result in you waking up each day with a feeling of looking forward to what the day will bring, then DO IT!
With that said, there are several considerations that should be accounted for to ensure that your retirement is everything you want it to be.
2. How do I plan for retirement?
Start with you and your specific circumstances and requirements. Look at your spending, income, assets, savings, current investments, insurance, taxes and estate management.
Eliminate debt
Aim to clear any outstanding debts before you enter retirement. By starting your retirement debt-free, you’ll be able to use your retirement income for things that really matter. If you’re already retired and you’re still carrying debt, such as a mortgage or credit card, speak to an Endorphin Wealth Financial Adviser and put a plan in place to become debt-free.
Also, consider how you should approach your retirement saving as you move through different life stages.
All this may require some tough decision-making. For instance:
- Do you want to live frugally now for future financial freedom or, would you prefer taking steady and consistent saving steps?
- Are you comfortable with riskier investments which may offer better growth – the type that could keep other people up at night?
- Would you prefer to let the experts manage your savings or to make the investment decisions yourself?
- Are there ways you could boost your super while enjoying associated tax benefits?
- Should you salary sacrifice?
Readjust your portfolio for retirement needs
Throughout your working years, you may have relied on an aggressive investment strategy, taking calculated risks so you could see substantial growth in your retirement savings. But as you near and enter retirement, it’s usually time to ease up on the risk. Your goal is no longer to grow your money but to hang on to what you have. This is when you can begin shifting your portfolio into more conservative investments.
3. How much is enough?
The answer to this question will be different for every individual and is largely dependent upon the lifestyle you aspire to in retirement.
Expectation vs reality
The time when you want to retire can often be quite different to when it actually happens. According to the ABS, around 70% of those intending to retire from the workforce indicated that they intend to retire after reaching age 65. But whilst you might be prepared to keep working well into your 60s, there’s a significant gap between that expectation and reality.
For many people it’s a case of being pushed into retirement by circumstance rather than making a carefully planned choice. Almost half of Australians are making this earlier than anticipated move into retirement due to health issues or redundancy – the average age at retirement in recent years was just under 63.
How long will you spend in retirement?
Freedom from working life can be a positive, even if it happens sooner than expected. But it can create problems for your finances when your time in retirement stretches into several decades. A National Seniors Australia survey (2015) found that those aged 55-64 underestimated their life expectancy by almost five years.
That said, many Australians are enjoying a comfortable retirement. How they achieved it is no secret: through sound retirement planning.
Superannuation
These days most people can choose their superannuation fund, and those who do not make a choice will use the super fund nominated by their employer.
Most superannuation funds can be classified into one of these categories:
Industry super funds: Originally developed for employees of certain industries, many of the larger industry funds are now open to anyone to join.
Retail super funds: Usually run by financial institutions, for instance, a bank or an investment company, and open for anyone to join. They often have a wide range of investment options.
Corporate super funds: Organised by companies on behalf of their employees, they may be operated under a board of Trustees or managed by an appointed retail or industry fund.
Public sector super funds: For government employees only.
Self-managed super funds (SMSFs): A private superannuation fund that you manage yourself. It’s a growing sector which appeals to many because it offers greater flexibility and choice in the type of assets you can invest in.
No matter which type of fund you’re in, a sensible approach to savings and maximising the benefits of superannuation at any age is one of the keys to a comfortable retirement.
5. Estate planning
None of us like to dwell on this, but eventually our lives will come to an end. It’s vital to have a plan in place so that the right assets are left to the right people in the right way.
Having a properly crafted estate plan can assist your family in avoiding the substantial expense of lengthy probate or guardianship proceedings.
Here at Endorphin Wealth, we are not licensed or owned by the big banks and financial institutions, so the advice and wealth management we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers that can be tailored to our client’s goals and needs. We have offices located in Sydney and Melbourne, where you will be able to find a financial advisor that is suitable for you.
For an obligation free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au
