A Guide To Retirement Financial Planning

Although retirement may seem far away, it tends to arrive far sooner than most people expect. The sooner you plan for it, the higher the chance of enjoying your desired lifestyle when you stop working. Developing a retirement strategy will help you feel more financially secure as you grow older, and offers greater peace of mind about your ability to provide for yourself – and your loved ones. With this in mind, let’s look at retirement financial planning, including what you need to consider and how seeking financial advice will drastically improve your retirement strategy.

How to plan for your retirement

Financial planning for retirement can feel overwhelming, so the best approach is to divide your retirement strategy into steps. Let’s look at each stage of the retirement financial planning process.

Determining your retirement timeline

The first step of retirement financial planning is determining when you want to retire. Naturally, this could change, but it’s important to have a general idea. While the official retirement age in Australia is 67, your retirement age will be determined by your financial situation, health, work options, and other personal circumstances.

A retirement timeline also determines how much time you have to implement your financial plan. If you’re 30 and plan to retire at 65, for instance, you generally have more options. Conversely, if you’re 40 and plan to retire at 55, you have less time and may have to seek financial advice to develop a more proactive investment strategy.

Alternatively, your financial plan for retirement may be determined by when you can access your super, which will be available once you’ve reached your preservation age (for people born after 1st of July 1964 the preservation age is 60)

Similarly, your retirement financial planning could be influenced by your qualifying age, i.e., when you’re eligible for the Government Age Pension (For people born after the 1st of July 1957 the eligibility age is 67)

Age Pension eligibility is also determined by:

Residential status: being an Australian resident for a minimum of 10 years

Income and assets: the higher your income and assets, the lower your pension – up until a threshold, after which you’re ineligible.

Assessing Your Retirement Goals

Next, consider your retirement goals: your ideal lifestyle and plans for all that hard-earned extra time and freedom. For instance:

Do you plan to travel, and for how long? Will you explore Australia or venture overseas?

Will you relocate? Will it be cheaper or more expensive?

Which hobbies and interests will you pursue?

Will you have an active social life?

Generally, the simpler your retirement plans, the less income you’ll need. While more active and elaborate retirement plans will cost more.

Evaluating Your Current Financial Situation

Assessing your present financial situation will reveal whether you’re on track to meet your retirement goals. And, if not, how you can refine your retirement strategy. This includes:

Income: How much do you earn? Do you plan to increase your income, i.e., further education, professional development, etc.?

Savings: how much do you have saved? Based on your current and projected income, how much more can you save?

Super: how much is it worth, and what are your monthly contributions?

Assets and Investments: what’s their total value?

Insurance: do you have sufficient coverage for unforeseen circumstances that could derail your retirement strategy, e.g., income protection, trauma insurance, and life insurance?

Estimating Retirement Income Needs

The next step is calculating your retirement living costs. These will be determined by your desired lifestyle, so it’s vital to consider your retirement goals beforehand. This could include:

Basic living costs:

Housing, property tax

Utilities

Groceries

Clothing, household goods

Transport

Health care

Insurance

Social life: hobbies, dining out, etc.

Travel plans

Supporting children, grandchildren, or other relatives

Estimating your living costs allows you to evaluate your retirement income options and determine whether they’ll be sufficient or if you need to make adjustments in advance.

Generally, your retirement income will come from a combination of:

• Your super
• The Age Pension
• Savings
• Assets and investments
• Part-time work

Creating a Retirement Savings Plan

Here are a few ways to increase your savings and boost your available retirement income:

• Better budgeting: create a budget to reduce expenses, then save or invest the savings
• Make voluntary contributions to your super: regular small contributions will compound over time to add up to a significant amount
• Downsize your home: if your home is too big for your retirement needs, i.e., your kids have left home, you could downsize and save some of the sale proceeds. Better yet, you could add the freed-up capital to your super and subject to meeting the eligibility criteria

Managing Retirement Investments

If you’ve yet to start investing as part of your retirement financial plan, consulting a financial adviser is the best way to determine which investments are best for your needs and circumstances. Alternatively, a financial adviser can review your asset allocation and risks and provide areas where you can reduce your risk and increase your performance.

Why should you get help with retirement planning services?

There are several reasons why it’s wise to seek retirement financial advice.

A financial planner can help you:

• Create a budget you can stick to
• Develop and refine your retirement savings plan
• Choose the most suitable super fund for your needs

Discover retirement income options you didn’t know were available

Retirement Planning with K Partners, renowned Melbourne Financial Advisers

No matter your current financial situation, the skilled team of financial advisers at K Partners can help your plan for your perfect retirement.

Contact us to book your free retirement financial planning in Melbourne.