What kind of retirement do you dream of?
Maybe you want to spend more time with loved ones, give back to the community or finally move to the beach.
Making a bucket list like this is the fun and easy part of planning for retirement, but how will you pay for it all?
Between your super and savings, plus assets or a potential pension, it can be difficult to gauge exactly how much money you have for retirement and how far it will stretch.
That means the real trick to planning a great retirement is working out how to fund your lifestyle…
Whether retirement is still on the horizon or you have already said goodbye to the workforce, it is never too late to put a financial plan in place.
We are starting this conversation, because money is a key to independence and that’s something every senior deserves. We want seniors to lead long, fulfilling lives, and to do that you need enough funds to support you along the way.
So we teamed up with Perpetual financial advisers to show you how to plan for financial freedom in retirement (these tips are from our 38-page guide How to Plan for Successful Ageing, which covers everything from money to health and legal affairs).
Work through the steps below and you will have a much clearer idea of where you stand financially.
1. Make a retirement lifestyle plan
Let’s get back to daydreaming about your perfect retirement. Make a list of all the things you’d like to achieve from your retirement. These might include:
- Spending more time with family and friends
- Travelling around Australia or the world
- Learning new skills and hobbies
- Moving somewhere new
Try to be specific with your goals (e.g. how often you want to travel and where you want to live), so you can accurately forecast how much your ideal lifestyle will cost.
Retirement is the time of your life to explore and try new things, so be open to speaking with other people about their plans or what they enjoy most about their retirement. Because there is a whole world of possibility waiting out there for you!
Use this list to estimate your annual living expenses in retirement, including –
- Essential expenses: Housing, groceries, utilities, car/transport, clothing, insurance and health care.
- Lifestyle expenses: Gym memberships, sports, hobbies, travel and meals out.
You also want to give yourself a buffer for occasional splurges, as well as an emergency fund. Once you have this plan, move on to step 2…
2. Get your head around how superannuation works
Superannuation confuses many people – so do not feel bad if you are overwhelmed by it. But with the right information, you can feel confident about accessing and managing your super.
So let’s dive in!
The first thing to do is calculate how much money you have in superannuation, or is likely to be in your account by the time you retire.
And while you are in this headspace, check whether you have any lost super.
The next step is a little more complex, and that’s deciding how you access your super. You have 3 options for this –
- Lump sum payment: Lump sum withdrawals are generally tax free if you’re aged 60 or above and you use the funds to pay off your house or other debts. This, however, reduces the funds available for your retirement income and if you use these funds to invest outside super, you may be charged higher levels of tax.
- Retirement income stream: You can transfer all or part of your super to a retirement phase income stream, such as an account-based pension, in order to receive regular income payments. For most people aged 60 or above, these payments are tax free.
- A little bit of both: You also have the option of withdrawing a portion of your money as a lump sum and transferring your remaining super balance to a retirement income stream. This approach may allow you to clear debts or take that European holiday when you retire, while keeping the rest of your super in a tax-effective environment for the long term and withdrawing a regular income.
Once you know how you will use your super, you will begin to get a much clearer idea of how your retirement income will operate.
A financial adviser can also show you how to maximise the way you save and access your super, and you will find handy detailed articles on all aspects of superannuation via National Seniors Australia.
If you are yet to retire, this step will help you to decide whether to make additional contributions to your super or save in other ways.
3. Work out any additional income streams
The final step involved in creating a clear financial plan is working out which sources of income you will have access to. These income streams might include:
- Superannuation account-based pension
- Pension and other government assistance
- Term deposits
- Dividend investing
There is more detail about what these streams are and how to access them in our free downloadable guide that you can print and keep, How to Plan for Successful Ageing.
FREE GUIDE: How to Plan for Successful Ageing
We have partnered with Perpetual to develop this public information guide about wellbeing and financial security as you age.
We hope this ebook helps to make this stage of your life as fun and fulfilling as possible without encountering unfortunate pitfalls. Chapters include…
- Retirement planning and transitioning
- Accessing your super
- Funding your new life
- Exercise, nutrition and wellbeing
- Keeping safe at home
- Living options as you age
- Navigating My Aged Care
With 38 pages of tips, this is our biggest free resource to date! And you can download your copy here.