Sometimes you can’t help but wonder about the day when you no longer have to wake up early to go to work and have the ultimate freedom to do whatever you want with your time in retirement. Reaching retirement is a pivotal moment in any Australian’s life. But before you retire, a lot of preparing and planning should be done beforehand.
Planning for retirement can be extremely overwhelming, especially if you don’t know where to begin. Don’t worry, though, because we’re here to help you plan for retirement!
In this article, we will share the ultimate retirement guide to planning for retirement in Australia. Keep reading ahead to learn more!
Retirement Plan Tips
As you’re thinking about retirement in Australia, you may be in a fuss about ensuring that you meet your retirement goals and that you’re entering the next pivotal moment in your life as prepared as possible. Financial planning plays a key role in this.
Create a retirement plan
The first thing you need to do to have a retirement plan is to create one. You can write it down in a notebook or have it typewritten; it can either be simple or detailed. Be sure to include the following:
- Your retirement lifestyle and priorities – You need to prioritise the most important factors first. These factors can include your preferred social activities, the location of where you want to live, and more.
- The timing – This is when exactly you want to retire. It can change in the future, but having a starting point is good enough.
- Your retirement income and living expenses – Make an estimate of how much income you’ll need in retirement. Create a savings plan and budget to prioritise what you spend.
Prepare an emergency fund
Having an emergency or contingency fund acts as a safety net for you to land on should there be any unexpected expenses like medical bills or any repairs.
Plan where you will live
You will need to find a steady place for you to live as you reach your retirement years. If you’re still renting, you may be considered eligible for an additional payment if you do, getting payments like the Age Pension.
However, if you have your own home, you can use some of your super (if available) to pay your mortgage if you still have it. Additionally, you can consider downsizing to have some extra money on hand or to support your lifestyle. You can also move to a location much closer to family and other services. But, before you do so, you need to check the tax impact and determine if it will affect the benefits you’ll get from the government.
Pay off debts
This is an obvious tip, yet many still seem to neglect it. So, if you have a mortgage or any other outstanding home loans, try to assess on the most optimal way of paying them off.
Financial Planning: Retire Debt-Free
As your working life comes to an end, your recreational and social life doesn’t have to! Financial advisers stress the importance of being debt-free to enjoy a comfortable retirement. Here’s how you can lessen your debt or enter your retirement years debt-free:
- Pay any outstanding debts before the deadline passes to avoid any penalties.
- Make a comparison of how much you earn, spend, and owe.
- Try paying the whole amount instead of just the minimum owed amount.
- Create a serious budget and stick to it.
- Assess your debts and get the total amount to get a clear picture of how much debt you have.
- Check to see if you’ll benefit from rolling your debts into one. This strategy might save tax and boost your retirement savings.
- Assess if you have the financial capacity to make additional repayments.
The last thing you want is some additional stress during your retirement years, so be sure to clear out the debts that you have, or at least minimise them as much as possible before you retire.
Questions to Ask Yourself Regarding Planning for Retirement in Australia
When it comes to planning for retirement in Australia, it’s not exactly an easy task. It can be overwhelming, which is why we’ve prepared some guide questions for you to follow so that you can have a clearer assessment and you’re able to work out your retirement goals better.
Here are important questions you need to ask yourself for a better retirement planning process.
How much will it cost me to live my preferred lifestyle?
Retirement calculators can provide an idea of how much you’ll need. You need to factor in your current lifestyle and your plans for the future. Furthermore, you should also consider your current salary, super balance and assets. There are many free retirement calculators online that you can utilise to get a more specific calculation.
However, the best way to do this is by scheduling a consultation with a reliable financial representative so that you’re also given suggestions and recommendations on which steps to take to reach your retirement goals.
What is my risk appetite for investing?
This is an important question whenever investing is involved, and it’s a vital factor in your retirement plan. Investments that are low in return involve less risk, while investments that are high-yield are less secure, meaning there’s more risk involved. When it comes to investing, there will always be a specific amount of market fluctuation. Having an investment is a long-term strategy.
Those who will take longer to retire will assess the ups and downs of the market much better compared to those who are about to retire. With that in mind, you need to consider your time frame and cash flow when it comes to developing your investment strategy to be able to make a smart investment decision towards your retirement income.
How can I control my expenses and build my savings?
As soon as you have a clear idea of your current financial situation, then it’s time to determine how exactly you can manage your expenses to better your financial well-being in the future.
Let’s start with an easy example: If you’re spending $1500 monthly on rent, then alternatively, you can plan to buy and pay all the property’s costs and not have to pay rent anymore as soon as you stop working. Additionally, there is almost no limit to how this step can affect your retirement savings in the future, so it’s highly recommended to see a reliable retirement planner who can assist you in structuring this crucial aspect of your strategy.
What is my timeline for retirement?
When it comes to determining your timeline for retirement (or the time between now and the age you want to retire at), how you structure your retirement plan will have a big impact on it.
Let’s say you’re currently in your mid-20s, and you plan to retire by the time you reach 65. You have about 40 years to utilise different financial strategies and save ambitiously to reach your retirement goals. Having a longer timeline puts you at a higher advantage, and try strategies that are higher in risk and allow you to assess any market fluctuations that can produce long-term rewards.
On the contrary, if you’re already in your 40s or 50s and want to retire at the age of 60 years old, then you need to be a little more conservative with how you invest for your retirement goals. If you realise that you’re not at the point in life where you have to be, then your lifestyle after you stop working should continue to be in a modest capacity.
For this stage of life, specific strategies are to be utilised to maximise your retirement goals, and hiring a professional retirement planner can help you with that. They can incorporate superannuation contributions and tax strategies and utilise the existing assets to add more to your retirement fund during the remaining time you have and decrease the gap between your current situation and where you hope to be.
What kind of retirement lifestyle am I aiming for?
Asking yourself this question needs to you visualise the kind of lifestyle you want to be in as soon as you stop working. While some people dream of travelling yearly abroad, others are satisfied with just the fact that they get to enjoy the wonderful scenery here in Australia. Some people plan to move into a much smaller house, and others want to live by the beach.
The thing about retirement planning is that it isn’t just about surviving; it’s also about being free. Key factors such as being able to take trips and go out for dinner after something to keep in mind while you’re doing your planning currently.
As you’re thinking of your goals in retirement, you can also start thinking about the goals connected with them. Let’s pretend that the rent you pay for your home costs $2000 every month, and you spend around $1200 monthly, too. Not just that, but you also spend another $1000 on various expenses; lastly, you take a yearly vacation worth $10,000. To sum it all up, that’s a total of $60,400 annually for you to live your life comfortably.
Here’s a weekly breakdown of the expenses:
- Rent – $500
- Food – $300
- Various Expenses – $250
- Vacation – $208.33
This gives you a total of $1258.33 in weekly expenses.
You need also to consider that the only time people can receive the government Age Pension is by the time they reach 67 years of age (or 66 years and six months if they’re born before 1957).
After calculating the total amount, it’s easy to confirm that comprehensive planning is very crucial if you want to turn your dreams of retirement into a reality in the near possible future.
Frequently Asked Questions
Here are some of the commonly asked questions about planning for retirement in Australia.
At what age do I have to retire?
In Australia, there is no prescribed retirement age. You can retire anytime you wish, but factors such as your health, finances, employment prospects, personal preferences, superannuation plans, and partner’s demands may be important.
How much money do I need to retire?
To be financially prepared for the future, you must save up for retirement. According to statistics, retirees who are over the age of 65 years old and want to maintain a comfortable lifestyle will need a yearly budget of $43,317 for single individuals and $60,977 for couples, assuming that they have their own residential property and are in relatively good health.
One would need to have a yearly budget of $27,648, whereas a couple would need to have an annual budget of $39,775 to maintain a modest way of living throughout retirement. As you consider retirement planning options, taking note of these numbers is very helpful, as well as any income sources you have that’ll cover your expenses.
Am I eligible for any government entitlements?
You may qualify for certain government incentives if you consider retirement planning in Australia. Age pension, disability support pension, and caregiver’s allowance are examples of government benefits that may be important factors in your retirement income in conjunction with your other assets.
What are some common retirement planning mistakes?
Common retirement planning mistakes include not starting early enough, not saving enough, underestimating expenses leading up to retirement, and not consulting professional retirement planning services.
How can I create a retirement planning strategy?
You can create a plan by setting financial goals, understanding your retirement needs, determining your risk tolerance, and establishing a savings plan. Using tools like a retirement calculator can also be beneficial.
What is the retirement age in Australia?
The retirement age in Australia can vary depending on the individual’s financial stability and goals. However, the typical range is between 65 and 67 years. It’s crucial to understand your goals as you approach this period.
What is the Association of Superannuation Funds of Australia (ASFA) retirement standard?
The ASFA retirement standard is a benchmark that provides an idea of how much is required annually to fund a ‘comfortable’ retirement lifestyle in Australia.
Do I need to seek financial advice when planning for retirement?
It’s generally advisable to seek Australian financial services or advice when thinking about retirement to ensure you make informed decisions, maximise your retirement income, and tailor your plan to your specific financial security needs.
Conclusion
Retirement can simultaneously be exciting and scary, so it’s always important to plan ahead so that you can live comfortably after you stop work. As soon as you retire, you’ll have all the time to do the things you wanted but couldn’t do due to past responsibilities.
Don’t let money control you during your retirement years. Let’s work as a team and start saving for your future today!
