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6 Top Things You Need to Know When Planning Your Retirement

Posted by Dean McKinnon on 9 September 2015
6 Top Things You Need to Know When Planning Your Retirement

#everyoneneedsaplan when thinking about retirement.  However, most of us don't start thinking about it until we are almost ready to retire and think that our Superannuation will be enough.  In reality, most people are underprepared for retirement and the comfortable lifestyle they have worked for may not be so comfortable.

Planning for Retirementshould not just involve financial plans, you also need to plan your lifestyle when you no longer work.  A sound financial plan will cover all aspects of your finances and take into account what type of lifestyle you will want in the future.

Here are my 6 Top Things You Need to Know When Planning Your Retirement

1. Start planning at least 10 years before the date at which you think you would like to retire.

Don't wait until you are almost retired to start thinking and planning for your retirement years.  You need to think about WHEN you would like to retire and then set a plan in place at least 10 YEARS BEFORE retirement date.

  • You need to make sure that you can accumulate sufficient investments to be able to meet your retirement expenses.
  • You need to make sure that you know what you will need, and whether or not you have the financial means with which to achieve the retirement date;
  • If you know when you would like to retire, and what you need to be able to retire, you can then make an analysis as to whether or not it is feasible for you to retire at the time you would like, or whether you have to either reduce your goals, or extend your retirement date;
  • And if you leave it too late, your choices may be limited, therefore you need to start the process seriously at least 10 years prior to when you think you would like to retire.

2. Decide what you want to do when you no longer work

It is extremely important for you to know what you are going to do when you no longer have to get up each day and go to work. You need to give as much, if not more thought as to what you will be doing when you no longer work every day. This is not only for your well being mentally but it is important in completing your financial planning to enable you to do what you want to do everyday without working.

  • Too many people focus on having the financial means to be able to retire, and don't give enough thought to what they will actually do when they retire from full-time work;
  • It is better for some people not to retire from full-time work, as they may enjoy working and it gives them something to do each day;
  • And working at least part-time whilst you are retired may also give you the ability to ensure you keep your mind active;
  • Humans have a basic need to be needed, so make sure you do something in your retirement which requires you to be needed by someone else; it doesn't have to be a major responsibility, and could include something like volunteering at a local school or social club, etc.

3. Don't confuse being financially independent with being retired.

Being financially independent and not reliant on employed income to meet your living expenses, means that you have sufficient investments generating sufficient income to meet your living expenses as well as all of your capital expenses (such as updating car; regular annual holidays; etc,);

  • Some people don't like the idea of retirement - so don't think of it as being retired as such, rather set your financial goals to be financially independent;
  • Being financially independent means that you can work if you want to, but you don't have to;
  • Working part-time may also meet your need to be needed, and keep your mind active;
  • Working part-time whilst you are financially independent may also give you some extra income in order to maybe achieve some of your bucket list items;
  • Working part-time if you are financially independent means that should you not wish to continue working part-time you can always stop.

4. Make a detailed and costed list of all your capital requirements at retirement

Make a detailed and costed list of all of your capital requirements at retirement, so you know how much cash you will need to meet those expenses when you retire.

  • Capital requirements such as updating your vehicle, buying that motorhome to travel around Australia, or going on the world trip you have always wanted to do;
  • Capital requirements at retirement are not to be confused with capital required to meet your regular living expenses;
  • The capital must be accessible to you, as you will need it to make the purchases. For example, an investment property cannot be considered as capital for meeting expenses at retirement, unless that property will be sold, and the proceeds used to meet your capital requirements in other words you can't sell one room of your investment property in order to purchase your new vehicle.

5. Make sure you can access at least part of your investments

Make sure you can access at least part of your investments in order to meet your capital requirements and regular living expenses.

  • Having investments tied up in illiquid structures (meaning you cannot access part or all of the investment to pay for capital expenses or regular living expenses) effectively means you cannot meet your retirement financial needs;
  • For example if you had three investment properties in retirement, the income from those three properties may not be sufficient to meet your regular living expenses (especially if you have to pay tax on some of the income received from those properties).

6. Consult a Financial Adviser and Be Realistic About Your Retirement Goals

Make appointments with your financial advisers, and make sure that your own thoughts about retirement are REALISTIC. 

There are legal and tax implications involved with retirement and a Financial Adviser can provide all the necessary information for you to make informed decisions.

  • You need to consider not just the financial aspects of your retirement, but also the legal and taxation aspects of you retiring;
  • Of course you need to make sure you have enough money to retire, but you also need to know how long you think that money will last (quite often people live well beyond their life expectancy, and the life expectancy is usually the basis for a cash flow projection in any financial plan what happens if you live beyond that, and you've spent all your money assuming that nothing will be left at your life expectancy?);
  • You need to determine if any of your existing life insurances are to be kept to manage any risks in retirement, and indeed if they are affordable in retirement?
  • You need to understand the taxation implications of being retired, which is vastly different from being employed, and will include significant changes at your retirement age; and
  • Therefore #everyoneneedsaplan to make sure they can retire.

If you do not have a Financial Advisor and would like more information about our Financial Planning Services, and planning for your retirement, please don't hesitate to Contact Us and arrange your Free Financial Assessment today - because.... #everyoneneedsaplan!

Is your future retirement lifestyle worth a phone call? Phone: 1300 261 373


Author:Dean McKinnon
Tags:RetirementFinancial PlanningSocial Security

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