Important considerations when planning for retirement
Good planning before you retire can make your retirement years smooth sailing. It is important to consider what age would be realistic and financially feasible for you to retire as opposed to simply when you would like to retire. Retirement differs for each person and a variety of scenarios need to be taken into account when taking control of your money and planning for your retirement needs. The first things to do are to work out how much money you will need to retire and to know your possible income from your superannuation fund.
Obviously the most common factor influencing when you intend to stop working is financial security. Generally, higher paid workers and those with a well thought out retirement plan are far more confident of their estimated retirement age. Another reason for retirement is the personal health or physical ability of you or your partner (as they may need full time care). This is often unexpected, so a good plan comes in helpful here too.
Work out how much money you will need
When you retire from full-time work, you’ll need enough money to live at the standard you want for the rest of your life. Start by working out a rough yearly budget and look at your current living expenses and work out how they would change if you retired.
Your housing costs will be very different if you expect to have paid off your mortgage by retirement. If you have children, consider whether they will need financial help from you after you retire. As well as ongoing living expenses, it also pays to plan for occasional one-off expenses:
• Some people may want to make the most of their new-found freedom by taking a holiday overseas or a trip around Australia.
• Others may want to treat themselves to a new car. If you have goals like these, include them in your plans as the first step towards achieving them.
• You will also need to plan for more mundane but necessary expenses such as repairs to your home or replacing your appliances as they wear out.
When you retire you may be eligible for the Age Pension and a number of other benefits including discounted public transport fares, concessions on your electricity and gas bills and free or discounted health care.
Your superannuation is your investment for your future. It’s important to understand what you will be entitled to after you retire. You may be able to choose how you want to get your benefit. Your fund may offer you a lump sum, a pension or a mixture of both. Since superannuation contributions are now required by law, this means that younger people will find it easier in the future to plan for retirement as a lot of the responsibility for super contributions had been taken away from them.
You can use your superannuation (or other money) to buy special retirement income products offered by superannuation funds and life insurance companies. These products receive tax concessions, and you may also have to pay less tax on income you receive. There are many different types and they have different effects on your eligibility for government assistance.
The earlier you retire, the longer you will have to live on your savings. You might have to support yourself for 30 years or more. In addition to any age pension you may receive, take a look at what your superannuation will give you and check how your savings are going. If you don’t have as much as you need, you may want to consider working a little longer or working part-time so you can build up some extra money.
Good financial advice can really help you get your plans in order. It can also help you decide when will be the appropriate time to retire. Retirement is all about preparation and the experienced team of accountants, financial planners and lawyers here at The Quinn Group can assist you with your retirement and retirement planning needs and queries. For more information submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.