Rethinking your retirement plan
Retirement planning isn’t just about money. As columnist Annette Sampson writes, thinking about relationships, lifestyle and purpose, as well as your finances, will help you feel confident about your future.
A little about Annette
Annette has spent many years writing about how we can all make the most of our personal finances. She specialises in making complex subjects like super easier to understand.
It feels like we spend half our working lives planning for retirement. Building super, getting our finances in shape, dreaming of plans we’ll have time to indulge.
But it’s still a big deal when you realise it’s happening soon. I don’t know about you, but I feel I’m drifting towards retirement rather than having a fixed date and concrete plans. I know people who have worked full-time and then officially “retired”. Others have it forced on them through things like redundancies or changed life circumstances.
No matter how you get there, retirement is a big life change – right up there with getting married, divorced, or having kids. It’s not just stopping work or ending that regular salary. It’s about how you want to spend your new-found leisure time and how you will fund that.
In the years before you plan to retire, it’s worth thinking realistically about your hopes and expectations for the future.
It’s not just about money
Relationships. Tough question: how are you going to cope with all that extra time with your partner or family? According to an article in Psychology Today many couples find retirement challenging.
Too much togetherness, different views on aging, and financial anxiety can all cause relationship stresses. Rather than waiting for cracks to appear, it’s a good idea to talk through these issues before retirement becomes a reality.
Do you need to set boundaries so you have “me” time separate from your partner or to avoid too many demands from family now that you have all this “free time”? How do you see yourselves in 10 or 20 years? Are your views on aging aligned? What sort of lifestyle do you want? How comfortable are you with the idea that you will be living off your savings?
What to do with all that extra time. I have friends who have embraced retirement as a great adventure and taken up trekking, mountain biking and anything else that captures their imagination. But it is not uncommon to feel lost without the structure (and status) of full time work. Many retirees intend to spend their time travelling, pursuing hobbies, or grandparenting. But those things may not fill the gap that stopping full time work leaves.
You’re not just giving up a job when you retire. A sense of engagement, purpose, social connection, and structure are just some of the intangibles that work can bring to your life. How will you adjust to those changes? Do you need to find some part-time or volunteer work to add some purpose and structure to your life? How satisfying is your social network? Do you need to find new friendships to feel connected in retirement?
Again, is your partner on the same page as you? If they are happy grandparenting or pottering in the garden, but you want to do more, this needs to be recognised and addressed – ideally before you reach your retirement date.
Where to live. If you’re anything like me, the idea of moving house is a nightmare. What to do with all the “stuff” accumulated over the years!
But we do need to consider whether our current living arrangements will still work for us. If you want to travel do you need a high maintenance home or a smaller place that you can lock up and leave? If you chose your home because of its proximity to schools or because it could accommodate adult kids, is it time to find somewhere more in tune with your future needs? Does the idea of living in a retirement village or community for older people appeal? Will you need something more accessible as you get older?
There can be financial considerations too. Downsizing can free up capital to fund your retirement lifestyle – or to boost your retirement income if you can make a downsizer super contribution.
Health check. I was at a get-together recently where one of the main topics of conversation was pacemakers!
Your health will in large part dictate what you can do and how well you can live in retirement. Prioritising your health and realistically planning your future health care just makes sense at this stage of life.
OK, so some of it is about money
Financial check. Hopefully, you’ve been managing your money in preparation for retirement. If you haven’t done so yet, there’s still time! As the day draws closer, it’s time to do a stocktake and pay attention to detail.
You could start by drawing up a list of your assets (savings, super and other investments, your home and personal assets etc) and liabilities (loans, looming expenses). Can you retire debt-free? Do you have enough to fund the lifestyle you want? Russell Investments’ GoalTracker® program can help to take the guesswork out of this process.
There is still time to boost your retirement savings through extra super contributions or debt repayments. Or by restructuring some of your investments to provide the most tax-effective retirement outcome. Professional financial advice could help you understand your options and make informed decisions based on your individual circumstances.
How much income do I need? Moneysmart says a rule of thumb is that you need 70 per cent of your working life income when you retire. The Association of Superannuation Funds of Australia has a Retirement Standard that estimates the cost of different retirement living standards while Super Consumers Australia has handy Retirement Savings Targets showing how much you will need to save for various spending targets and how much of this will be funded by the government Age Pension. While these guides can be helpful, at the end of the day, everyone has different lifestyle goals and circumstances as they enter and navigate through retirement—so it’s important you decide what’s right for you.
Where will my retirement income come from? Most people get their retirement income from three basic building blocks – super, the government Age Pension, and other savings.
It’s worth getting advice on how to mix these three to maximise your income. You can generate a tax-free income from super from age 60 if you meet the requirements, though the Australian Institute of Health and Welfare says almost half of older Australians have a government benefit as their main source of income in retirement.
Have I got all my boxes ticked? As you move towards retirement, you’ll need to review things like insurance and estate planning. Your finances will be changing so you’ll need to review your Will and arrangements like an enduring power of attorney.
Taking these steps in the lead up to retirement could help you feel confident your finances are sorted and your loved ones looked after, so you can get on with looking forward to the retirement you planned.
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The views and opinions expressed in this article are those of the author and do not purport to reflect the views and opinions of Russell Investments.
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