Retirement is that golden period in life we all dream of, days filled with leisure, travel and pursuit of passions that we have put on hold while we push on through our working years. However, realising such a big vision does require careful planning and laying down a sound financial foundation first. That's what retirement planning can do.
Why is retirement planning important?
In simple terms, retirement planning helps you maintain your desired lifestyle after you stop working. It's about having the financial resources to cover your expenses, pursue your dreams and enjoy your well-deserved freedom. It is also the steps required to ensure you are not a burden on your family or the Government. Without a wealth management plan, you run the risk of outliving your savings or facing unexpected financial burdens in your later years. No one wants to be worried about how they are going to pay the bills, imagine this when you are no longer working and have no income from a salary.
Key Elements of a Comprehensive Retirement Plan
Creating a retirement plan is more than just saving money; it's about crafting a roadmap that secures your future and aligns with your lifestyle goals. By addressing key areas such as expenses, investments, and healthcare, you can build a retirement strategy that offers peace of mind and financial freedom.
Define your retirement vision
What does your retirement look like? Consider things like lifestyle, health, hobbies and the level of activity you think you will want (going on holidays a certain number of times a year or maybe getting a boat for weekend sailing). This will help you define what your financial goals are.
Estimate your retirement expenses
Consider housing (will you have paid off your place or will you be renting), healthcare (probably one of the biggest expenses for people as they get older), transportation, food and entertainment. Oh and don't forget inflation!
Take a look at what you have invested, (savings), perhaps property and also what you owe, (debts). That puts everything into a proper perspective.
The Australian Government's MoneySmart's Retirement Planner provides an in-depth guide to planning for retirement, including calculators, resources, and strategies for managing superannuation, estimating expenses, and preparing for health care costs.
Define a Savings and Investment Plan
Decide how much you will save and invest on a regular basis to achieve retirement goals by your retirement date. Study the different types of investment options available based on your risk appetite and time horizons. Remember it is never too late to start but the later you start the more challenging it will be.
Plan for Health Care Costs
Healthcare costs rise with age. Consider long-term care insurance and factor in probable health care costs in your plan. No one thinks about developing medical conditions or being a victim of a medical episode. The reality however, is that these do occur and planning for their possibility does two things: (1) You will have the financial resources to deal with it if it should happen and (2) If it doesn’t happen you then have some nice extra funding which could be used for continuation of the retirement phase or an unplanned event.
Choose the Right Retirement Income Streams
This requires you to reflect on all the the options open to you. These may include Social Security benefits, pensions, annuities and retirement savings plans.
Retirement is something you should look forward, not a phase of life where you feel stressed and stretched for money. Talk to us about how we can put you on the right path toward financial freedom and preparedness for your retirement when the time comes.