Retirement planning isn’t always something that is front of mind for people in their forties and early fifties. Sometimes there appear to be far more immediate issues that need to be dealt with. However, there is no doubt that planning early will reduce the possibility that you will not be able to retire with a large enough retirement 'nest egg'. If you're not able to retire with enough funds then you may have to put off retirement until you are in better financial standing.
Some early planning for the retirement phase of your life will give you the best possible chance of being able to take that exciting step. Yes, we said it. Retirement should be exciting!
Our advisers work with a large number of retirement planning clients. Based on the experience of our advisers here at Financial Framework, we have put together a short guide on some of the most commonly asked questions about retirement planning.
The most obvious one those planning retirement ask is "When Can I Retire?" It's a great question, so let's kick things off with when you can retire.
The answer is... anytime you want! The reality is a little more complicated.
The vast majority of people will have to wait until they can either access their superannuation or be entitled to the aged pension.
In order to access your superannuation, you need to have reached your preservation age. This age is gradually increasing depending on when you were born. For people born between the 1st of July 1961 and the 30th of June 1962, their preservation age is 57 and anyone born after the 1st of July 1964 will have to wait until they turn 60, if you continue to work past your preservation age you are not able to access your superannuation until you are 65.
The eligibility for the aged pension is also graduated depending on your age. People born prior to the 31st of December 1952 are entitled to the pension now, however if you were born after the 1st of January 1957 you will have to wait until aged 67.
This is probably the toughest question to answer, and while it is never a once size fits all situation, the Association of Superannuation Funds of Australia (AFSA) provides some retirement standard benchmarks.
AFSA has calculated the following retirement asset values and retirement incomes needed for a comfortable retirement. These figures should be taken on board with a pinch of salt as they consider a comfortable retirement for a couple and a single, assuming that they own their own home and are debt free.
AFSA indicated that a couple needs approximately $640,000 in superannuation and a single person needs $545,000.
In terms of income, a couple will need approximately $60,457 per year, whereas a single person would need $44,011 per year.
These figures might be ideal for some, but they certainly aren't a guide for everyone. Perhaps a good indication would be the holiday allowance calculated for a couple on a weekly basis. ASFA allows for around $134 per week or $6,968 per annum to travel domestically and abroad. Considering that international flights can vary anywhere from a few hundred dollars to a couple of thousand dollars, this may suck up the majority of your travel budget. So, if you're seeking to travel more often in retirement then you may want to increase your nest egg and your income to allow for that.
Something that many people approaching retirement don't often consider is their health.
Good health will have a major impact on your satisfaction with life in retirement. A focus on health will allow you to enjoy life fully in your later years. Just like you would make a retirement plan regarding your finances you should also make a health plan.
Now is the time to build the habit of exercising and eating right so you can add more years to your life and more life to your years. Get regular check-ups and screenings so that any problems can get caught early enough to do something about them. Take care of your health now so that you can enjoy a a long and full retirement.
If you are like most people, you have super funds and savings scattered in various places. Consider consolidating your super and automating as many of your financial transactions as possible. You want to simplify all of your retirement related work so that you’re free during retirement to do as you please. Nobody wants to be bogged down by disorganised financial problems.
Review your estate planning.
Review your Will to ensure that it continues to meet your wishes, in particular review who you have nominated as your executor. It would also be wise to consider putting in place enduring powers of attorney. A Power of Attorney is a legal document where you appoint a person of your choice to manage your assets and financial affairs if you are unable to do so due to illness, an accident or your absence. These powers are simple to organise and will prove invaluable if you become mentally incapacitated and unable to handle your financial affairs.
Quite often when you consider planning your retirement you plan financially, you plan where you are going to live, whether you want to upsize, downsize, or make a tree or sea change. However, there is one vital consideration that usually slips through the cracks. You don’t plan for what you're going to do with all the free time you have on your hands!
So, plan what you’re going to do with your money AND your time. Start thinking about a hobby or interest that you would like to pursue.
Find friends, because your social circle gets smaller when you leave work. You can join a club, do an evening class or simply invite a neighbour in for coffee.
Get active and go out and do things. When you become a retiree, you can feel like you lose your identity a little bit. Despite this, you can still make a contribution to society.
Don’t be negative, find the positive things in life. You can also make a positive impact on other peoples lives by considering volunteer work.
The biggest tip is to go out and enjoy yourself, do the things you always wanted to do but couldn’t find the time.
Retirement is a celebration of what you have achieved up until that time in your life. It really is just another phase of life, and one that should be embraced and enjoyed!
If you're considering retirement planning, the most obvious place to start is your finances. As we mentioned earlier, the value of your desired finances changes from person to person. To discover what your number might be, please reach out to one of our expert financial advisers. Our experts will provide you with a free planning session on helping you find the retirement income you need.