We spend about a third of our lives in retirement and the years we spend leading up to retirement may have a significant impact on the quality of life we enjoy when in retirement. It’s never too early to start thinking about retirement but longevity risk is one of the biggest risks facing retirees.
You may have plans to retire by a certain age, by a set date or following a particular event. However, for some of us, retirement could come around sooner than expected because of ill health, an inability to continue in a physical role or the need to care for a loved one. The key point here is that it pays to make plans long before they are due; you never know what lies around the corner.
According to the Financial Planning Association (FPA) of Australia, 50% of Australians are concerned they do not have enough money to retire on. With careful planning, you could ensure the best retirement possible.
The building blocks at this stage in life include:
- Budgeting – developing and managing a strategy to keep on track of a savings target
- Borrowing to invest – using the equity in your home for wealth accumulation strategies
- Reviewing insurances – ensuring that your levels of cover match your actual needs
- Managing personal debt – understanding the difference between good debt and bad debt
- Super vs non-super investments – identifying which vehicle suits your situation eg trusts, SMSFs
- Boosting your superannuation savings – contribution strategies including:
- Salary sacrificing
- Spouse contributions
- Splitting super contributions
- The government co-contribution
- Non-concessional and self-employed contributions
- Contributing to super vs paying down mortgage vs non-super assets
- Starting a tax effective pre-retirement pension – transition to retirement
- Modelling retirement strategies:
- How much do you need to retire?
- How are you going to fund retirement?
- Income goals in retirement
- Managing longevity risk
- Reviewing risk profiles and asset allocation
- Social security and government benefits
- Reviewing your Will and estate planning requirements