When it comes to retirement planning, the biggest asset you have is time. What most people lack is a solid plan to get you to where you want to be. The closer you get to retirement age, the more critical it is to stop thinking and start doing. Getting retirement ready isn’t as simple as swapping your salary for an income stream; there are a lot of moving parts, both emotionally and financially.
Regardless of your current assets and income, proactively planning is the best way to ensure the next step you make is the right one. While you may be ready to retire, your super may be telling a different story – here’s what you need to consider to retire right.
When do you want to retire?
Having an idea of when you want to retire will help your advisor determine how much money you’ll need to fund your retirement. In Australia, superannuation only became compulsory in 1992, so there are a lot of Australians who are currently underprepared for retirement. Prolonging your retirement by a few years could help you boost your savings, so it’s essential to plan your ideal retirement age before it creeps up on you.
When it comes to answering this question, it’s important to consider your current financial situation, including how much super you currently have. You’ll also need to factor in whether you own your home outright, how ready you are to stop working, as well as your health and potential medical expenses.
How will you fund your retirement?
While every situation is different, it’s more than likely your retirement will be funded by your superannuation. At the moment, employers are legally required to contribute 9.5% of an employee’s gross income into super. Depending on your goals, these contributions may not be enough. Before you make plans, it’s important to seek professional advice to ensure you’ve got enough money to fund your lifestyle in retirement.
When you take into account your income, assets and debts, you may want to consider making additional contributions to your super. You may also consider downsizing and releasing your assets, salary sacrificing or contemplating a transition to retirement strategy. There’s no one-size fits all strategy; it’s about getting the right advice for your current circumstances.
What you can do right now
Outside of the family home, super is the largest asset most people own. While you may not be ready to retire today, there are six steps you can take to get retirement ready:
Depending on your age and current income, it may be tax effective to make voluntary contributions to your super. Be mindful that the ATO have certain thresholds and provisions in place, so always get advice before topping up your balance.
Reduce your debt
While there’s a time and place for debt, the closer you get to retirement, the less it serves you. Without a steady income to pay it off, debt can eat into your nest egg and leave you with less.
Consolidate your super
The more accounts you have, the more fees you’re paying; over a working lifetime, hidden costs can cost you dearly.
Map out your assets
To allow for better retirement planning, take the time to map out your assets, including your superannuation balances.
Analyse your investment options
As investments differ for every life stage, planning an investment portfolio requires careful consideration, strategy and analysis.
Seek professional advice
AD Wealth is a privately owned financial planning firm with a hands-on approach to wealth management. Working by your side, we put your needs first and proactively seek to build a solid asset base that will meet your financial and lifestyle goals. With over three decades of experience, we’ve learned a lot about people and what drives them. This knowledge underpins each of our wealth creation strategies and sets us apart from others in the field.
When should you start doing something about your retirement planning? TODAY.
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Tony has 33 years’ experience as an accountant, and 13 years’ experience as a CPA. His first 18 years’ experience involved financial, management and operational accounting roles at a senior management level, in the security, transport, and forensic accounting industries