Barbara Booth* says that whether retirement is on the distant horizon or just around the corner, there are steps we can take to feel prepared and positive about life after work.
One of the most common questions clients ask me is “When should I retire?”
The answer of course depends on a wide range of factors – including where you are financially, and what lifestyle goals you have for retirement.
Whatever stage you’re at, there are some things you can do to get prepared.
Retiring in 5 years +
While retirement might seem far away, now is a great time to think about your vision for retirement.
How do you want your day to day life to look? Might a sea change be on the horizon?
The answers will inform your decisions down the track.
Now is also a good time to ensure you have the right balance between saving and spending.
A good starting point is to review your budget and spending habits to see if you could save more for the future. It’s also worth reviewing any debts you have to see if there’s a faster way to reduce them.
Make sure you also review your super, and whether you should be contributing more.
If you’ve fallen behind on your contributions, you could explore salary sacrificing as a way to boost your super and save on tax.
If you’re a member of a defined benefit scheme, additional scheme contributions could help maximise your end benefit.
Retiring within 2-5 years
As you approach retirement, you may have some big decisions to make, such as whether to downsize or stay in your home, or whether to consider part-time work in the lead up to retirement.
A Transition-to-Retirement strategy could help you financially as you reduce your hours.
At this point, you have some time up your sleeve if you need to give your super a final boost.
Taking stock of your financial position and clarifying how much money you’ll need in retirement will help you identify how on track you are with reaching your retirement goals.
If you’re a member of a defined benefit scheme, maximising your benefit will likely put you in a better position for retirement. Depending on your scheme, you might also be able to catch up on points you’ve missed.
It’s also a good idea to review your outstanding debts and review your investment options to ensure that you’re getting the most out of your investments, without being exposed to too much risk.
Retiring within 2 years
With only two years to retirement, how and when to leave work is going to be a big decision you’ll need to make soon.
Are you ready to stop working entirely, and if so, do you have enough to retire on, or do you need to work for longer?
Now is a crucial time to review the ways you can maximise your super and minimise your tax before you retire.
It’s also critical at this time to review your investment choices to ensure that you are taking an appropriate level of risk for you.
At this point, sequencing risk becomes a key risk and so you need to protect your savings from significant volatility, whilst ensuring that they generate sufficient returns for you.
Now is also a good time to explore whether you are entitled to any Centrelink benefits. Even if you don’t qualify for the Age Pension, there are likely to be some benefits you can access, such as the Heathcare Card.
Already retired?
If you’re already in retirement, assess whether your finances are adequately supporting your lifestyle.
If you’re falling short each month, could you access more money, or return to work? Or, if you find yourself with a surplus, could you invest that money so that it can grow over time?
As a retiree, you need to stay vigilant about the risk of running out of money (longevity risk), and the risk of inflation chipping away at your savings.
Regularly reviewing your investment strategy and your finances is crucial at this time.
Keeping on top of changes to legislation is also good practice.
If you change your living arrangements (such as move into an aged care facility), make sure you review your finances and see how they will be impacted by a major change.
Whatever your time of life, getting the most out of your retirement takes planning.
An expert financial planner can support you in making informed decisions as life takes it inevitable twists and turns.
Take the next step
With the right help, planning for your retirement is easier than you think. For more expert tips, visit the StatePlus website at this PS News link.
* Barbara Booth is a registered financial adviser with StatePlus and can be contacted at [email protected].
StatePlus, formerly State Super Financial Services, is one of Australia’s leading providers of financial planning. Since 1990, our retirement experts have provided life changing financial advice to public sector employees and their families. With a StatePlus planner by your side, you can feel confident about reaching your financial goals to live the retirement you really want.
This article was published in December 2018. The information in this article is current at the time of writing the article. This is general information only and does not take into account your personal objectives, financial situation or needs. It is important to seek financial and taxation advice that takes into account your personal objectives, financial situation and needs before making any decisions based on this information.
