If you’re in your fifties, chances are you’re starting to think about retirement – and there’s plenty to look forward to.
With all that extra time on your hands you’ll be able to read and travel more, spend more time with family and take up that hobby you’ve always wanted to try.
But the one thing you don’t want to be doing in retirement is worrying about money, or run out.
No matter what age you plan to retire, now is the time to set yourself up financially to make sure your retirement is just as fulfilling as you imagined.
Know where you stand financially
Before you can start planning for retirement, you need to know how much money you have, how much you’ll earn and what sources your money will come from.
List your assets and their worth. Tally up your savings and investments. Find out how much superannuation you have and when you can access it.
Although we are lucky to have the aged pension in Australia, it is means tested so think of it only as a backup. Plan not to need it, and you will be in a much better position.
Work out how much money you’ll need
After decades of earning a regular pay packet, the thought of not having one might be a little scary, but it doesn’t have to be if you’re armed with the facts.
Ask yourself what age you’d like to retire and how much money you’ll need for each year of your retirement, based on average life expectancy and the kind of lifestyle you want to live. Then work backwards to determine how much you’ll need in superannuation and savings.
Bear in mind that with more time to do jobs around the house, travel, go to the movies and take the grandkids out, you will spend more than you think. Be realistic about your needs and wants, and give yourself a buffer.
Get your skates on
Now you know how much you’ll need, it’s time to knuckle down and make the most of your working life to set you up for retirement.
If you have debts, pay them off as quickly as possible. You do not want to take these into retirement with you. Work some overtime, or work a couple of extra years if you need to. Sell items you no longer need. Cut down on unnecessary expenses. Do everything you can to keep yourself in the black.
Boost your super
Your superannuation is your retirement savings plan and it should be working just as hard as you. When did you last examine its performance?
There is a tendency to go conservative with your investments later in life, but remember you still have 15 years or more to build. The right mix of conservative and high-growth strategies for you may have changed so it’s important to get the right balance for your circumstances.
Don’t forget you can also put extra money into your superannuation. Should you make extra contributions from your pre-tax salary, or should you make a personal contribution (you will need to complete the appropriate paperwork). The superannuation cap for all concessional contributions is $25,000 i.e. this includes the employer contribution.
Check your insurances
Examine your insurances and make sure you have the appropriate level of cover. If your children have flown the coop, can you save by converting family cover to couples or singles insurance.
Health and income protection insurance become more important as you age. If you don’t already have these, signing up could be pricey. But losing your salary when you are running out of earning years could cost you even more, so it’s worth considering.
Get professional advice
Sitting down with a qualified financial adviser is the best way to ensure you’ve ticked all the boxes when it comes to retirement planning. They can provide advice that’s tailored to your personal circumstances to help build your ideal retirement.
Check out the Australian Government’s MoneySmart website for great tips, resources and calculators to help you plan for your retirement.
Most importantly, don’t put your head in the sand. The earlier you seek advice and implement your plan, the better your long-term outcome.
Plan ahead and you’ll be in for a long and satisfying retirement. You’ve earned it!
About the author: Helen Baker is a licenced Australian financial adviser and author of two books: On Your Own Two Feet – Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce – Your Survive and Thrive Financial Guide. Helen is among the 1% of financial planners who holds a master’s degree in the field. Find out more at www.onyourowntwofeet.com.au.