Research from Investment Trends revealed that only 44% of Australians over age 40 feel prepared for retirement. This goes to show that a retirement plan isn’t something we usually think about until the time comes. Nevertheless, it is one of the more important plans you can make.
While the average retirement age in Australia is 65, you’re able to access your superannuation from as early as age 55 and will be eligible for your pension at 65.5 years (however, this will increase to 67 years in 2023). There really isn’t a perfect time for retirement, just a matter of when you plan to do it. For some of us, this is still a long way away. But while time is on your side, it’s better to make preparations now so you won’t have to worry about it later on in life.
The financial aspect is important to consider, but it doesn’t make up the whole picture. We’ve put together some pointers to think about when creating a retirement plan:
Outline your retirement needs
Understanding your retirement needs is a good place to begin. It would be worthwhile asking yourself the questions below:
- How much will it cost to live your preferred lifestyle?
- Are you able to control the costs?
- What is your risk tolerance on your investments?
- What does your retirement timeline look like?
- Will you have any dependants after you’ve retired? What are their needs like?
Make room for other costs
Once you’ve outlined your needs, you’ll have an idea of how much it’ll cost to fund your lifestyle during retirement. However, if you still have loans or other debts to pay off, you will need to include them in your plan. Do you want these settled by the time you retire or are you able to manage the outstanding debts during your retirement?
You could make personal contributions to your super while you’re still working to give it an added boost. Bear in mind that even if you are above 65, you may still be able to make contributions to your super for your upcoming retirement. You can also utilise any investments you have to provide equity or funding for your later years. According to ASFA, the budget for retirees to live a comfortable life are $43,901 for singles and $62,083 for couples (considering the retirees own their own home outright and are relatively healthy). A comfortable lifestyle enables an older, healthy retiree to engage in a broad range of leisure and recreational activities and maintain high living standards through the purchase of household goods, private health insurance, a reliable car, clothes, and the occasional international holiday travel. The goal at the end of the day is that you want to be able to fund the lifestyle you want to have or have grown accustomed to throughout your working life.
Lastly, do you plan to stay in your current property after retirement or are you planning to downsize? Relocating to a smaller place could help with the cost of living that can be put towards utilities, other expenses, or even to save for a rainy day.
What do you plan to do with all that free time?
Now this is the fun part. Once you’ve got the nitty-gritty of your retirement plan aside, it’s time to figure out how you want to utilise all that free time. Did you want to travel, take up a hobby, or learn a new skill? While this is completely up to you and your preferences, it is important to always be mindful of your budget so that you can enjoy your golden years stress-free.
Whatever your goals may be, remember that a little bit of planning today could make a world of difference tomorrow. If you require financial advice and assistance to prepare for your retirement years, the team at FutureNow Finance are in partnership with trusted Financial Planners, and we will work together to create a personalised financial solution according to your individual circumstance. Call 1300 013 730 or email firstname.lastname@example.org.