Planning for retirement is something like time travel. You have to imagine how your life is going to be 10-20-30-40 … years from now. You can actually talk to your future self and ask some questions – where are you living, are you comfortable with paying your bills, do you travel, do you still need to work, and the like. Actually, when you are planning your retirement, you will be providing for your future self, and also for the ones dependent on you.
Certainly, all of us prefer to have a secure financial future. This “security”, however, can come only through careful planning for your retirement. Here are the main issues you need to consider and some sound advice:
Table of Contents
Start Early
Life expectancy in Australia is one of the highest in the world, with the average pushing 83 years and steadily increasing. This, of course, is great news, but as we can expect to live 20-30 years in retirement, it is logical to start planning for this as early as possible.
Some people start to think about retirement in their late 50s. This, of course, is better than nothing, but it will limit your retirement options. What is best is to start planning for your retirement as early as possible in your working life. In this way savings will be much easier, financial results – much bigger, and your retirement options – much more. A best-case scenario would be to start retirement planning as soon as you start your first job. Don’t get frustrated if you are in your 50s and you are just starting, though. You will be able to compensate, it is just a tad harder.
Make Some Decisions
These are decisions which only you (eventually together with your spouse) can make. These decisions will be the basis for your retirement planning. This is the part where talking with your future self can come in handy. Here is what you need to decide envisaging the time after you retire:
● Where Are You Going To Live?
Will you live in your own house, or will you downsize and curb your living space? Living facilities tend to occupy a substantial amount of our budget, so it is important to envisage where you plan to live in your retirement future.
● Will You Still Carry Debts?
Paying your installments from your paycheck may be trivial. However, you will need to consider whether these payments will be as easy in your retirement years. If you will carry debts in your retirement years, you will have to include them in your retirement budget. If not – you will have to make a plan of how and when to get out of debts, and not have to worry about any installments.
● Roughly What Bills Will You Have To Pay Monthly/Annually
These are normally overlooked, as being not so significant. Yet in the time when your salary income is no longer coming in, it may become challenging to continue engaging the gardener or the pool guy. Will you be driving a car? Will you still maintain a pool? Just consider what you would like your bills to be.
● Do You Plan To Travel
Traveling is an activity that many engage in in their retirement years. Be it to travel around the world, or to a specific destination, which has always fascinated you. Consider how often you will travel and for how long a stay. Travel expenses could be considerable and you need to provide for them, should you expect the globe-trotter in you to awaken in your retirement years.
● What Sort Of Activities And Recreations Will You Prefer
Even though retired folk do not go to work every day, it does not mean that they will not be engaging in many activities and recreations. These may require some funding, which needs to be provided for. Exactly which activities are for you – this will be your decision.
You may continue with your discussion with your future self and continue with the list of decisions that will have an impact on your retirement budget. Putting some numbers to all of these decisions will help you determine what you will need to have the retirement life of your dreams. Once you have the figure, you may reconsider some of your decisions or you may need to boost your retirement provisions. Either way – you are in the know.
Tax Accountants Or DIY
The above decisions are your job entirely. You may be tempted to continue with DIY-retirement-planning all the way. However, your retirement planning is advisable to get some professional help, in order for you to get the results that you are looking for.
Tax accountants, self-managed super funds (SMSF) accountants, accountants, or small business accountants(provided that you have a small business) are all useful help that you can find. Further to their help in standard book-keeping and tax-filing activities they can provide expert advice on tax optimization of your retirement funds. This means that you will be saving taxes, by providing for your retirement years. This is of course a great contribution to your retirement welfare.
Determine When
There are three important considerations for your retirement planning:
● When Did You Start
As we mentioned, this information will be important for determining what contributions you will have to do to your retirement plan. The earlier – the easier.
● When Will You Retire
Generally, the retirement age in Australia is between 55 and 60 years of age, depending on when you were born. However, your retirement planning, superannuation plan, health, and working opportunities will play a big role. Still, it will help your planning if you have a retirement age in your head.
● When And How Will You Access Your Super
You can do this again between 55 and 60. Accessing your super will be an important part of planning and providing for your retirement years. However, as we live longer, it may be reasonable to continue working and building up your superannuation fund, past the years when you are eligible for retirement. On average in recent years Australians retired and accessed their super at 63 years. You need to have a plan for the age when you wish to access your super. Consulting a superannuation accountant may also be a good idea.
Financial Planning
Knowing how much you will need for your retirement years and when they will start, now you need to make the necessary financial provisions. The standard sources of income you may consider are:
Superannuation Funds
Ask your super accountant for advice.
Age pension
Currently, you will be entitled to it at 65 and a half, but this age will rise.
Life insurance
Consult your life insurance broker for available options.
Investments
Consult a financial advisor for possibilities.
Savings
Again a financial advisor will prove useful.
Other proceeds for which you are eligible
Your superannuation accountant should know these.
It will be best if you can have a healthy diversified mix of all of the above. Whatever your situation is, it is reasonable to plan your retirement funding.
Now you know how much you will need at your time of retirement, you have a good idea when this will happen, and you have professional advice to support the achievement of your goals. You are all set for your golden years. Just enjoy.
