When should I start planning for retirement
The short answer is that it’s never too early to start thinking about retirement. The earlier you can start planning, the more time you have between now and retirement, and the more time you have to get things in order.
What changes as you get older are the ways in which this planning takes place. For example, you may start in your 20s by putting away a few dollars here and there to set up good habits. Ultimately, there’s no one size fits all solution, but the older you get, the more you should be thinking about the best way to set yourself up for life after work.
An experienced retirement financial advisor such as Aurora Wealth will be able to help you create a plan and advise you on where to invest your money, depending on your age, position and goals.
When you plan on retiring
In Australia, there is no set age for when you need to retire. There is however a minimum age you must meet before accessing your super or the Government Aged Pension, which is increasing over time and also depends on the year you were born.
Factors that might go into when you choose to retire include:
- Your health
- Financial situation
- Employment opportunities
- Individual goals
- Superannuation plans
Your current financial position
When planning your retirement, your current financial position needs to be taken into account. This includes how much money you’re earning now as well as all the financial decisions you’ve made up until this point.
Your current financial situation will include factors such as:
- How much is in your savings account
- How much you’ve invested, and where it’s invested
- What assets you currently have
- How much is in your super and how that’s invested
Any debts you still have
You may want to consider any debts you still have, and if you’ll need to carry these into retirement. Reducing debt before retirement can help to set your mind at ease when you’re no longer receiving disposable income.
You may consider some of the following to help reduce debt:
- Look at all your current debts and how much they total
- Compare what you owe against what you earn and spend
- Investigate whether it might be worth rolling your debts into one
- Pay your debts on time to avoid additional charges
- If you can, try to pay the full amount rather than the minimum amount owing
- Consider making extra payments if you can afford it
- Investigate providers who have lower interest rates and fees
We can look at your debt and the best ways to reduce it as part of your retirement plan.
Your spending needs
How much money you’ll need will be different for everyone, depending on their current situation and when they plan to retire.
There are some key questions you can ask yourself to work out how much money you’ll think you need when you retire. These include:
- What sort of lifestyle do you want to live in retirement?
- How much income will you need to fund that lifestyle?
- Will you be taking regular holidays? Are they going to be local or international?
- Will you be going out for dinner?
- Would you like to spoil your grandchildren?
- What kind of social activities do you plan to do?
There’s a lot of information out there that will tell you that you need a certain amount of money to require comfortably. In truth, there is no one size fits all solution, and this figure will depend on you and the lifestyle you want to live. Everyone’s dream retirement looks different. Some may want to live simply, while others imagine lavish holidays. Most people don’t want to spend their retirement wondering how they’re going to afford their next bill. Knowing what you want to spend your money on can help you determine how much you’ll need and allows you to budget accordingly.
Your housing situation
It’s worth thinking about where you’ll be living during retirement. Perhaps you’ve paid off your mortgage and are happy to continue living at home. Others may want to downsize or even move into a new place in the world. If so, moving costs and any money to be spent on the new location need to be considered.
There are many choices on where to live during retirement, and where you go should depend on the lifestyle that you want to live. Some of common choices for retirees are:
- Moving to a new location
- Home sharing
- Over 55’s or retirement living
- Aged care
- Caravans and RVs
Each of these options have pros and cons depending on the lifestyle you want to live, and each has different financial implications. Knowing where you want to be living during retirement can help you set a budget for how much you’ll be spending on accommodation during this time.
Frequently Asked Questions
Retirement plans are a great way to look at your current financial position and organise what you need to have the secure future of your dreams. Some of the frequently asked questions about retirement planning includes:
What happens if I do not have a retirement plan?
Retirement plans ensure you have the finances to have a stable life after you retire from work. Not having a retirement plan could result in:
- Less financial freedom later in life – this can result in more stress later in life as you try to make ends meet from having enough money to live day to day as well as money to spend on things you would enjoy
- Working for longer – if you do not have the retirement plan set in place, often you can find yourself in the workforce longer than the minimum age for retirement.
- Might not have enough savings – not having a plan, clear goals or a strategy can result in you not having enough money to have a secure and free financial future.
How much do I need to save to retire?
The amount of money you need to save for your retirement will depend on your current financial situation, your savings, what you would like your lifestyle to be after you retire, your debts and how comfortable you want to be in your savings. While the Australian Government has some estimates and predictions of how much you will need to have either a modest or comfortable retirement, it does not take into consideration what you want your lifestyle to look like after you do retire.
With the help of a financial advisor, you can work out exactly how much money you will need to save to have the secure retirement of your dreams.
How long will my money last in retirement?
There are many factors involved in estimating how long your money will last in retirement. This includes:
- Your current savings – depending on how much money you have saved for your retirement can result in how comfortably you can spend your money
- Your lifestyle – your lifestyle will have a large influence on how long your money lasts. This can include any travelling or holidays you plan to do or your hobbies.
- Your current debts – if you currently have any unpaid debts, you have to consider how much you have to pay off when you aren’t receiving any disposable income.
Our financial planners can help you decide how much you need to have a comfortable retirement and develop a plan to help you achieve that goal.
Can I get Government assistance while in retirement?
There are many government assistances that you can apply for during your retirement to help provide extra cash flow that can depend on your age, assets and your income. This includes:
- Age Pension
- Pensioner Concession Card
- Low-Income Health Care card
They can all be taking into consideration when planning your retirement and estimating how much you will need to retire.
What will my expenses be in retirement?
It is important to know what expenses you will have to account for during your retirement. That way you are able to be fully prepared to pay the things you need and live in financial freedom. This includes:
- Housing – you will need to consider what payments you will have to make whether you are renting or own your own home. You will also need to think about any renovations or unexpected repairs that may occur.
- Car – you will need to think about your current car and if it would need any repairs or maintenance in the future or if you would like to purchase a new car
- Family – you will need to think about your children and family and the financial support you wish to give them in the future
- Health – you will need to consider any health issues that may arise into the future including appointments and treatments
- Lifestyle – your retirement is an opportunity for you to try new experiences and hobbies, as well as continue to enjoy the ones you are currently doing. You will need to consider the cost of these hobbies in your retirement plan.
Retirement financial planners are a great help in managing your expenses and your income to ensure that you are able to have financial freedom after you retire.
What can I do in retirement?
When you do retire, you have a virtually unlimited possibilities of things you can do. But it does depend on how much money you have saved in your retirement plan. These activities can include:
- Travelling around the country in a caravan, campervan or by car
- Taking day trips and exploring towns
- Going overseas for a holiday
- Start a new hobby
- Stay physically active
Depending on what you want to do in retirement, we can develop a strategy on how you can achieve everything you want to and have the retirement of your dreams with our financial planners.
Can I plan my retirement myself?
Setting up your own retirement plan is possible, but it is better done with an expert. By planning your retirement with an expert in the field, you are able to benefit through:
- Expertise – our lead retirement financial advisor Micheal, has had over 10 years of experience as a financial planner, working with clients in many different financial situations, helping them to reach their financial goal
- Setting realistic goals – we are able to help you set realistic saving goals, keeping you on track and limiting procrastination
- Reducing stress – by consulting a financial planner, you are able to reduce the amount of stress you place on yourself calculating how much you need to retire comfortably. Our financial planners can help clear your mind so you can focus on other things
- Creating a tailored plan – a financial planner can help you to look at your current income, debts and assets, and create a tailor-made financial plan that takes into account every aspect of your life so you can have the retirement of your dreams
- Giving you confidence – having a financial planner help you create your retirement plan, helps you to have a clear focus and strategy, giving you the confidence to know that you are on the right track
Is retirement planning important?
Retirement planning is very important to ensure you have financial security after you retire and that you aren’t living out of your means. It allows you to understand your current financial situation and how much you wish to save and what you can to do to reach those goals.
Retirement planning also means that you will have enough money to live comfortably in retirement as well as reducing the amount of stress caused by financial strain. It also helps you support the lifestyle you wish to have. With a good retirement plan, you don’t have to cut back on what you want to do or give up on your retirement dreams.
By planning your retirement and setting goals in place, you don’t have to rely on Government support or assistance as your main source income, but instead can use it to supplement your current income. Financial planners can help you plan the retirement of your dreams so you can live securely and freely.
When should I hire a financial advisor?
It is never too early to start thinking about your retirement. When you first enter the workforce, your employer will put a small percentage of your pay into a superannuation fund. You can also put extra money into your superannuation as you start to work and earn an income. The earlier you start to plan your retirement and put money away, the more time you will have before your retirement to plan and put things in place.
Hiring a financial advisor can help you to plan the best way to set yourself up for life after work, no matter how long you have been working for or how old you are.
How do retirement plans grow?
Retirement plans are able to grow in many ways for you to live comfortably in your retirement. They can grow through:
- Your own contribution – as you create your budget or if you find yourself with extra money after being paid, you are able to put money into your retirement account yourself.
- Employer contributions – every pay period, your employer will put a small percentage of your pay into your superannuation fund
- Time – superannuation funds will continue to grow over time. The more time you have, the more time you can allow it to grow.
A retirement financial advisor is able to help you grow your superannuation and plan your retirement so you can have the retirement of your dreams and have the financial freedom you desire.
Our experienced retirement financial advisor
Leading the way at Aurora Wealth is our expert financial advisor, Micheal Anderson. Micheal has worked in the finance industry for over 13 years and has spent 10 of these as a financial advisor. He has achieved the designation of Certified Financial Planner and is a registered member of the Financial Planning Association of Australia.
Outside of the office, Micheal is a father to three children and enjoys being outdoors and staying active.
Michael is passionate about helping all his clients reach their financial goals and hopes to see the result in happiness and fulfilment. At Aurora Wealth, we take a deep dive into your goals and aspirations, creating a personalised retirement plan. We handle your financial planning to help ease the stress off your mind so you can focus on what is important to you. Our financial plans are flexible, changing depending on your needs.
We are based at Narre Warren and service the entire Casey area, including Emerald, Dandenong, Lynbrook, Cranbourne, Hallem, Clyde, Keysborough, Doveton and Lysterfield. We can either meet you face to face in our office or in your home or can meet you online on Skype or Zoom.