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Preparing for Retirement – What Should you Have in Place?
Retirement means different things for different people – it could be an opportunity to travel, spend more time with family, take up new hobbies, or just take it easy for a while; knowing you’ve earned every bit of it after many years in the workforce. But when you’re gearing up for the end of your working life, and looking forward to the freedom and flexibility of retirement, it is crucial to have all your ducks in a row well ahead of time. Before you hand in your notice, ensure you have a plan in place that comprehensively covers you and your family for the future – after all, the last thing you need in retirement is undue stress. Let’s explore a few things you should have ready to go in advance of retirement.
The Bucket List
This is perhaps one of the most exciting parts of getting ready to call it a day. Work out the things you want to do when you retire – this could be travelling the world; dedicating time to volunteering and community projects; taking up a hobby you’ve always wanted to try; or even move to another part of the world to experience a new lifestyle. With all the time you’ll have on your hands, it’s important to keep yourself occupied with things you love. In considering what you’ll get up to, factor in how much these things will cost, and how that might look against the money you’ll be able to receive in retirement. More on that below.
Not only will you need a way to fund all of the exciting adventures and activities you’ll be able to enjoy when you retire, you’ll also need to have plenty of money set aside for essentials, bills, medical expenses and other liabilities.
- Medical Expenses: As we get older, it’s likely that our medical expenses will increase – and unexpected medical bills can financially cripple even those who are still employed.
- Accessing Superannuation: Knowing when you can access your superannuation, and how you’ll access those funds in retirement, are both important to address long before you leave the workforce.
- Transition to Retirement (TTR): Accessing a portion of your super through a TTR pension is one way to increase your financial flexibility while continuing to work.
- Lump Sum or income stream: Some people also have the ability to access their entire superannuation balance as a lump sum, or move it into an account-based pension or annuity for a regular income stream.
- Tax implications: Keep in mind that there are certain tax implications that arise with accessing super, so it’s important to seek professional advice before coming to a decision.
Other Financial Factors
- Estate Planning: Engaging an estate planner is a good place to start in order to get everything laid out in terms of what you want to happen to your assets after you pass away, who gets it, and any other financial wishes you have.
- Downsizing: In many cases, people getting close to retirement age don’t have kids living at home any more, and find themselves living in a house bigger than what they need. The upkeep of a larger house is something that can become more arduous the older we get, and some people can unlock extra funds by selling the family home and moving into something smaller and less expensive.
- Debt: Take into account any existing debt you have, and how you plan to pay that off. You’ll still need to service any existing loans whether you’re working or not, and you certainly don’t want to be spending your retirement kitty on debt when you could be out there living life.
Overall, the preparation for retirement can be an exciting, daunting and very complex process in some cases. It’s important to have everything in place as early as possible, leaving you with fewer headaches and more time on your hands to live out your retirement years the way you want to. Getting advice from a financial adviser is a good place to start, as is engaging an estate planner and succession planner (for those in business). To have a chat with McKinley Plowman’s Wealth team, give us a call on 08 9301 2200 or visit https://www.mckinleyplowman.com.au/services/wealth/.
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