Planning your best retirement in five easy steps

Whether you are in retirement, about to start your retirement journey or planning for the future here are five simple steps to reach your goals now and in the future.

Step 1: Set your goals

Do you know what you want to do during retirement? Your goals may relate to travel, lifestyle, legacy, renovations or family. Now is the time to think about your own top priorities.

The answer to this question is different for everyone.  Some can’t wait to stop work and spend time with family and friends or start those hobbies that have been on the to do list for ages.  Others love work and would like to continue working part time or full time, either in their current job or doing something completely new.  Many just put off thinking about it as they fear the unknown or don’t think they can afford to retire.  The most important thing you can do for yourself (or as a couple) is to write down your wants, needs and dreams.  Are there any ‘unknowns’ you need to deal with to reach these goals? In short, do you believe your goals are attainable?

Step 2: What will this lifestyle cost?

Now is the time to work out how much money you will need each year. For many this is the biggest unknown. In How to Eat an Elephant – personal finance educator, Frank Wiginton acknowledges that getting your financial house in order is a big job. At first, you might even feel like you’ve bitten off more than you can chew. But don’t give up!

These bite-sized steps are very relevant when trying to plan your best retirement and work through how much it will cost.  

• First bite (step) write down your non-negotiable basic expenses (i.e. food, electricity, rates or rent, phone etc).  
• Second bite, write down those expenses that you want but could cut back on if you had to. 
• Third bite, write down your dreams (i.e. holidays, new car, renovations etc) then research the likely costs online. 

Now you have a much stronger understanding of “What will it cost”, that elephant probably doesn’t seem so quite so big anymore.   

Step 3: Get your finances in order

This involves planning for a long life in retirement. It’s a two-part process, which starts with understanding your life expectancy. Gone are the days when you retired at 55 and probably lived another 10 years or so.  For many of us retirement could last 15, 20, or 25-plus years.  Retirement Essentials’ free Life Expectancy calculator can help.  Why not take a look to understand what your life expectancy may be. The results can be very surprising. 

The second part of getting finances in order is to thoroughly understand the likely sources of your retirement income. It’s important to know:

• Your Age Pension eligibility
• How your super savings might combine with the Age Pension
• How other savings might contribute to your income.

Step 4. Get a forecast of what you will realistically be able to afford 

In Step 2 you did the hard work to calculate how much you will need to fund your desired retirement life and your special goals. Now’s the time to use the Retirement Essentials’ Safe Spending simulator and allow the calculator to do all the hard sums for you. This frees you up to view, in real time, the options of different spending levels throughout your expected life span. And bear in mind that most retirees spend differently across their life course. The early years of retirement are often termed the ‘active’ years, for a good reason. Many new retirees will need to purchase a car to replace a work one, renovations are often high on the wants list and extended travel is even higher. Over time and as we age, our aspirations can become simpler. This doesn’t happen for every retiree – we’ve all seen the articles on 93-year-olds trekking mountains in the Andes. But the general trend is that people do travel less and spend less as they reach their 80s and beyond. The wildcard in this discussion is that of aged care. Will you age at home? Or will you need a deposit for residential aged care? Most of us do not know, particularly early in our retirement journey, so talking to friends and family and age care specialists is a good idea.   

Step 5. Check if you need to make any trade-offs?

Can you achieve all your goals or do you have to adjust in some way? Using the safe spending simulator is not guaranteed to tell you that your savings can cover every plan, dream and goal. Some of us want more than we can ever afford. But there is also the possibility that your retirement income settings and strategies could be tweaked to create greater wealth and income. How so? There are many strategies that can be applied to the most common retirement income scenario – that of a part-Age Pension supplemented by superannuation. Some such strategies include using the ‘younger partner’ rules to allow an older partner to achieve higher pension payments. Sometimes starting an Account-Based Pension means a decrease in taxable income. Starting a Transition to Retirement strategy is also a way of reaching retirement goals sooner rather than later. So if your retirement spending forecasts seem too high to maintain, book a chat with one of our experienced advisers to explore ways of using the rules to maximise your savings and your income.

Retirement Essentials offers many different tailored consultations for those seeking bite-sized advice to manage their retirement income and entitlements. Here are some that may suit you if you would like to undertake a guided review of your retirement income possibilities.

• Retirement Forecasting (Compare two scenarios of  how your assets and income will look during your retirement journey). 
• Understanding more about super (Assess the options to help make your super work better for you).
• Maximising your entitlements (Assess any changes you might be able to make to maximise your Centrelink entitlements)
• Understand impacts of your home mortgage (look at the benefits of repaying or maintaining your mortgage in retirement)

How did this work for you?

How did you plan your retirement? 
Did you go through a step-by-step plan as suggested above?
Did you seek assistance? 
Or did you stop working without warning due to health or retrenchment?