Retirement is the time of life where you have the freedom to do what you want. Planning is essential if you want to have a comfortable and stress free retirement. Think about the lifestyle you want when you retire. Will you mix work and leisure? Do you have plans to travel? Where do you want to live? How is your health? All these things will affect the amount of money you need when you retire. The earlier you start preparing for this phase of your life, the better. Here are some steps you can take to get ready for retirement.
Keep your Super Goals
Think about your life expectancy
How much money you need in retirement depends on how long you live. People today are generally healthier and living longer than previous generations. On average, retired men can expect to live to 86, retired women to 90. This means if you stop working at 60, you are likely to need retirement income for at least 26 to 30 years, if not more.
How much income will you need?
Think about how much your income is now – you will need about two-thirds of this income per year to maintain your lifestyle.
List your assets and liabilities – Do a stocktake of your current financial situation. Make a list of all your assets (e.g. house, savings, shares, investments in managed funds, investment properties and super) and all your debts (e.g. mortgage, personal, car or investment property loans, credit card balance and tax debts). Deduct your debts from your assets to find out how much you’re worth now.
Next, work out how much income you need/want in retirement. It all depends on the lifestyle you want or can afford.
Generally, a comfortable lifestyle for a couple, including entertainment, a car, clothes, private health insurance and holidays, can cost about $54,000 a year. A modest lifestyle will still require about $30,000 a year per couple.
If you have been living on an above average income and you’ve paid off your home loan, you might need about 67% of your pre-retirement gross income to maintain your lifestyle. Talk to your partner about your expectations, future plans and the lifestyle you want.
Also think about any major one-off spending requirements after retirement. You may want to pay off your mortgage, do home renovations, take a big holiday or buy a new car. The trade-off is, the more you spend early in your retirement, the less you will have to live off later.
Income sources in retirement can come from a range of sources, including super, other investments and (possibly) the age pension.
Plan your retirement
If you want to boost your retirement income, you can consider:
• Increasing your super contributions
• Putting your money into slightly less conservative investment options (be sure to get financial advice before you act)
• Retiring later to keep the steady money coming in for longer
• Getting part-time employment
• Opting for a more modest lifestyle so you need less money in retirement
Planning for retirement is complex and it’s important to get advice from people with specialist knowledge, you can also talk to your retired friends to find out about their experiences.
It’s never too early to start thinking about how to maximise your income in retirement. Here at The Quinn Group our experienced team of accountants and financial planners can assist you to take steps required to get the best chance at the lifestyle you want. 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.