Retirement Planning
Retirement is one of the most important milestones in a person’s life, however it can also be one of the more daunting decisions for a person to make, particularly when it comes to the area of one’s finances. One of the most common reasons that people come to us seeking advice, is to answer the age old question “Will I have enough money to retire on a particular date?”
To help answer this question, there are a number of issues that a person should consider, ideally at least a few years prior to their intended retirement. These include:
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Working out how much income you will need in retirement. The difference between needing an income of $1,000 per week to meet your living expenses, compared to $2,000 per week, makes an enormous difference to working out how much money a person or a couple needs to fund a comfortable retirement. We always recommend sitting down with your partner to work out what a reasonable level of living expenses will be, both in the lead up to, and during your retirement.
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Do you have any specific goals such as overseas travel, buying a boat or a campervan, or helping your children to fund a home deposit?
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Will you or your partner continue to do some part time work? It is now becoming increasingly popular for people to transition out of the workforce, by reducing their working hours in the lead up to their eventual retirement date.
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What assets do you have available to fund your retirement? For most people, their main retirement assets will either be their superannuation, investment property(s), investments such as cash or shares, or their business. Some people may be expecting an inheritance, whilst other people might be considering downsizing their home. Getting a clear picture of your available assets is a key to knowing how you can fund your retirement.
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How are my assets invested? It is important for people to understand how their assets are invested, particularly in areas like superannuation. For example, some superannuation funds might have a relatively high risk investment strategy, which is not necessarily appropriate for those people who are only a few years away from retiring. Reviewing your investment strategy, and possibly looking to reduce your risk, is an important process in the lead up to retirement.
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What government benefits will I be entitled to? Having an understanding of what government benefits you might be entitled to, such as the age pension, or pensioner concession cards, can play a big part in determining if you are on track to meet your retirement goals. With careful planning, there are also a number of strategies available to maximise your entitlements to things like the age pension. And no, this does not always involve spending your money early!
Some people may consider obtaining professional advice in the form of a formal financial plan. A financial plan will analyse all of the above areas, and bring these together to show you if you are on track to meeting your retirement goals, as well as what strategies you should implement to both maximise and protect your wealth in the lead up to retirement. Ideally we would recommend that people start to obtain advice around retirement as early as possible.
If you would like to speak to one of our financial advisers about your plans for retirement, please call Roy Massey on 02 4919 5500 or email to rmassey@addisonpartners.com.au.