Wealth Management

The journey to retirement: 3 important questions all Australians must ask themselves

13 March 2019
4 min read

The journey towards retirement requires careful planning and consideration. It’s an arduous one, full of obstacles and challenges that will ultimately shape your future.

Unfortunately, many Australians don’t fully understand the necessary planning required to ensure a comfortable retirement, in order to live a life that they have always dreamed of.

It’s believed that nearly half of the Australian population retiring within the next four decades will not have enough money to live comfortably.

Given that retirement can represent as much as a quarter of your life, it’s imperative to appropriately plan.

How can you ensure that you’re not unprepared when retirement comes? Begin by asking yourself these three important questions.

What date would you like to retire?

In order to develop a concrete plan for your financial future, you must begin with a realistic start date for retirement. Obviously this can change depending on your circumstances, but setting a date will allow you to construct a plan regarding how much you may need. In addition to this, it allows you to begin making accurate calculations, ensuring that once you retire, you have the financial stability and independence to actually enjoy it.

What about those who are looking to make an early retirement but may not be in the financial position to do so right now?

There are other options, one of which focuses on outlining a transition retirement plan. This may include a gradual reduction in working hours per week for a number of years until you are in a comfortable position to support yourself moving forward. You may also consider partial retirement with contract work supporting you as your transition progresses.

How much money will you need?

A common misconception is that the magical number for retirement is $1 million.

Realistically, there is a lot more to retirement than simply setting a number. You need to make sure you consider, and take advantage of all resources at your disposal, including pensions, Social Security, other income, and income from your assets to be sure you will have enough finances each year to fulfill your retirement goals.

A general rule for retirement savings is that you should only expect to take out four to five per cent per year for your income. This calculation assumes that you will be able to increase that amount each year based on (moderate) inflation.

That means for every million dollars of retirement assets, you should expect to withdraw $40,000 to $50,000 per year (obviously this will vary from individual to individual). To many aspiring retirees, this figure does not sound like enough and it probably isn’t.

That’s why we encourage you to meet with a financial planner to devise a strategy to suit your individual needs and situation.

Why are you retiring and what are you passionate about?

This is the most important question of all.

Are you retiring because you’ve simply had enough of your current employer? Is it for health reasons, or to spend more time with your family and loved ones? Are you wanting to pursue a dream, a new goal? Or do you wish to travel and explore the world?

Whatever your decision may be, it’s imperative to ensure you factor this into your retirement date and financial requirements before you retire.

Will you need medical care? Will you need additional funds to support your desire to travel and explore? Are there additional tax implications and expenses you need to consider if you are planning on retiring overseas?

A financial planner can help you securely plan for your future and aid you in achieving your retirement goal. If you’re looking to review your current retirement plan or would like to develop a new plan for the future, we encourage you to contact one of our experienced financial advisers.