Wealth Management

How to retire richer: 7 strategies for pre-retirement

Jeremy-Leach Jeremy Leach
27 February 2024
6 min read

As you approach the milestone of retirement, the question of financial security becomes increasingly paramount. With careful retirement planning and strategic decision-making, you can position yourself to retire richer and enjoy your golden years.

What does it mean to retire richer?

Many people who seek financial advice want to know how to retire richer. However, retiring richer doesn’t have to simply mean financial wealth. It may also mean having a better life with meaningful experiences and cherished relationships in addition to financial security. This includes having the time and resources to pursue passions, travel, or engage in hobbies that bring joy, as well as recognising the importance of family and social connections.

This article will provide important money strategies for individuals nearing retirement. These strategies aim to help you achieve a balance between financial security and personal happiness.

1. Assess your current financial situation

Before deciding how to retire richer, it's crucial to conduct a comprehensive assessment of your current financial standing. Take stock of your assets, liabilities, income, and expenses. Determine your net worth and evaluate your savings and investment portfolios. Understanding where you stand financially will provide a solid foundation for crafting your retirement plan.

2. Set clear retirement goals

What does retirement look like for you? Define your retirement goals, whether it's traveling the world, pursuing hobbies, or spending quality time with family and friends. Be specific about your aspirations and quantify your financial needs. Setting clear retirement goals will guide your savings and investment strategies and help you stay focused on what matters most to you in retirement.

3. Maximise retirement savings contributions

At this stage in your career, maximising contributions to retirement savings accounts should be a top priority. Contribute the maximum amount allowed to your employer-sponsored retirement plans such as superannuation accounts or employer-contributed funds. Additionally, consider contributing to Individual Retirement Accounts (IRAs) or self-managed superannuation funds (SMSFs) to further boost your retirement savings.

4. Diversify your investment portfolio

A well-diversified investment portfolio is essential for mitigating risk and maximising returns, especially as you near retirement. Review your investment holdings and ensure they are aligned with your risk tolerance and retirement timeline. Consider diversifying across asset classes such as stocks, bonds, real estate, and alternative investments to spread risk and capture potential growth opportunities.

5. Explore income-generating opportunities

As you transition into retirement, explore income-generating opportunities beyond traditional employment. Consider passive income streams such as rental properties, dividend-paying stocks, bonds, or annuities. Explore part-time work or consulting opportunities that align with your skills and interests. Supplementing your retirement income with additional sources of revenue can provide financial flexibility and peace of mind.

6. Develop a tax-efficient strategies

Understand the tax implications of different retirement accounts and investment vehicles, including your superannuation accounts. Consider withdrawing funds strategically to optimise tax efficiency, such as taking advantage of tax-free withdrawals from certain superannuation accounts or utilising the "bucket" approach to manage cash flow in retirement.

For example:

  • Personal deductible contributions. Contribute to your super and claim a tax deduction. This is like salary sacrifice but for self-employed individuals.

  • Low-income super tax offset. Get up to $500 tax offset if you earn under $37,000. The offset is added to your super balance, not your personal tax.

  • Spouse contribution tax offset. Contribute to your spouse's super and get a tax offset of up to $540. The amount depends on your spouse's income and the contribution made.

  • Transition to retirement strategy. Reduce personal income tax without lowering your take-home pay. Use salary sacrifice or personal contributions to fund tax-free pension income.

  • Account-based pensions. Start a tax-free retirement income stream from your super. Enjoy tax-free investment earnings within your pension account.

  • CGT retirement exemption. Disregard part or all of a capital gain from selling a business asset. A lifetime cap of $500,000 applies, with conditions on contributions.

  • Recontribution strategy. Convert taxable super components into tax-free ones. Reduce potential tax on super death benefits and protect against potential rule changes.

  • Seek help from a financial advisor. Navigating the complexities of retirement planning can be daunting, especially as you near retirement age. Consider seeking professional financial guidance from a qualified financial advisor or retirement planner. A financial professional can help assess your financial situation, develop a personalised retirement plan, and provide ongoing guidance and support to help you achieve your retirement goals.

Balancing wealth and happiness

While financial stability is vital for meeting basic needs and achieving long-term security, true happiness often stems from experiences, relationships, and personal fulfilment. To strike a balance between wealth and happiness, it's essential to prioritise both financial well-being and emotional fulfilment.

Firstly, cultivate a healthy relationship with money by practicing prudent financial habits such as budgeting, saving, and investing wisely. Setting realistic financial goals and adhering to a balanced budget can provide a sense of security and control your financial future.

However, it's equally important to recognise that true happiness cannot be bought with money alone. It’s important to prioritise personal well-being by maintaining a healthy work-life balance, practicing self-care, and investing in personal growth and development. Engage in activities that promote mental and physical health, such as exercise, meditation, or spending time outdoors.

Ultimately, achieving a balance between wealth and happiness requires mindfulness, intentionality, and a willingness to focus on what truly matters in life. By aligning financial goals with personal values and prioritising experiences over material possessions, individuals can create a fulfilling and balanced foundation to thrive in retirement, enabling you to retire richer than you are today.

Key takeaway

Learning how to retire richer is possible with careful planning, disciplined saving, and strategic decision-making. To ensure a secure and fulfilling retirement, there are several steps you should take.

  • First, assess your finances to understand your current financial situation.

  • Next, set clear retirement goals that align with your desired lifestyle. Save more money for retirement to build a stronger financial base.

  • Additionally, investing wisely can help grow your retirement savings over time. Finding ways to make additional income can also contribute to a more secure retirement. Planning for taxes is another crucial aspect to consider, as it can impact your overall financial situation.

Lastly, getting advice from a financial advisor can help you with your investment strategy or retirement planning. For more information on how Findex can help you prepare for retirement, get in touch.

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Author: Jeremy Leach | Associate Partner