What to consider when preparing for retirement

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What to consider when preparing for retirement

The earlier you start planning for retirement, the better. With life expectancy for men reaching 80.4 years and 84.6 years for women1, it pays to be on the front foot with retirement costs and lifestyle changes during this period. This guide is your starting point for things to consider when preparing for retirement.

Finances & superannuation

The cost of retirement

Planning your financial future needn’t be full of scary numbers. That’s why investment advisors like Scott Pape have been telling Australians there’s often less to save for your retirement than you think.2 You don’t need a million dollars in your super to live a cushy retirement, he says at a minimum you need a paid-off home plus:

  • Couples: $250,000 in super
  • Singles: $170,000 in super.2

The Association of Superannuation Funds of Australia (ASFA) says retirees aged 65–85 need a budget of $44,011 a year for a single person, and $60,457 a year for a couple to live comfortably in retirement.3 This is enough to cover essentials such as electricity and gas, as well as enjoy lunches and dinners out, take an annual overseas holiday, and stay in the loop with your favourite newspapers and magazines.

ASFA says retirees aged 65–85 need a budget of $44,011 a year for a single person, and $60,457 a year for a couple to live comfortably in retirement.

Your Super options

When you’re eligible to draw on your super – usually when you reach preservation age or retire from the workforce – you can turn to three main options4 (or a combination of options) for financial support. Seek professional guidance when choosing the best one for you.

Leave your super where it is

This options gives you more time to come up with a super plan that suits your desired retirement lifestyle. While your super sits tight, you may be able to continue contributing to it depending on your age and employment. Keep in mind, however, you will have to pay up to 15 per cent tax on investment earnings, so it’s advised to weigh up the costs of this with other options.

Invest in a retirement income stream

This popular option creates a regular retirement income by transferring your funds to a “retirement phase” account within your super fund. You can take advantage of paying less tax, potentially making your money stretch further in smaller, salary-like instalments, and be able to make a lump-sum withdrawal when needed. There are minimum amounts that must be withdrawn every year based on your age, and a limit on how much can be transferred to a tax-free retirement phase.

Withdraw as cash

This option is handy if you’re wanting to reduce your debts or withdraw partial lump sums at regular times. It does pose a potential risk for splurge spending and tax implications though if you invest your money outside of super.

Happy older man sitting on garden bench

Health & wellness

You’ve done all the hard work, now it’s your time to relax and enjoy retirement. Don’t let physical and mental ailments hold you back from making this a rewarding time in your life.

Keeping your mental health in check

According to research on seniors and relationships, four in five respondents confessed to feeling lonely at some time in their senior years.5 This social isolation can be the result of seniors being single, widowed or divorced; or no longer in the workforce.

Remaining active and socialising regularly is one way to achieving a healthy and happy mental space. Close to 84 per cent of respondents in the same research5 said they participate in some form of social activity at least once a month, and catch up with friends frequently to ensure their retirement years are happy.

Work as a volunteer

Any type of loss, such as those involved with relationships, independence, work and income, is a risk factor for older people developing anxiety or depression.6 One way to combat this is to consider volunteering to build relationships, social interactions, and purpose. One in two seniors volunteer in their local community5, with more than one in five (22.6%) respondents choosing to help charities or community groups, and one in seven (14.1%) volunteering to help local clubs or sporting organisations.

Never retire!

Another idea to consider is never retiring. We’re not suggesting you slug it out in your labour-intensive job forever; instead, consider working one day a week as a transition into retirement. Research shows retirees who continued to work after retiring experienced fewer major diseases and fewer functional limitations than those who fully retired.7

Choosing to work one day a week or once a fortnight may supplement your Age Pension. Singles can earn $164 per fortnight before their Age Pension reduces, and couples can earn $292 (combined). Be aware your pension will drop 50 cents for every dollar you earn over that amount.8

Singles can earn $164 per fortnight, and couples can earn $292 per fortnight (combined) before their Age Pension reduces.

Estate planning

If you’re considering retirement, it’s also a good time to start planning how your assets will be distributed should you pass away. Protect your family by creating a legal will, and ensuring you have a “binding nomination” with your super to ensure your benefit goes to who you want it to go to.

Assess your personal insurance status. It may be time to reconsider protections you’ve had set up such as income protection insurance, and instead explore your health insurance options further or consider funeral insurance to protect your family from immediate expenses should you pass away.

When it comes to your retirement, it helps to get off on the right foot with a smart plan. By considering your financial plans, estate planning, and your health and wellness into retirement years ahead of time, you’ll gain valuable peace of mind that will result in golden years packed with enjoyment and discovery as opposed to stress and worry.

References

  1. Life Expectancy at BirthAustralian Bureau of Statistics
    http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/3302.0.55.001Main Features22014-2016?opendocument&tabname=Summary&prodno=3302.0.55.001&issue=2014-2016&num=&view
  2. Why you don’t need $1m to retirelifebeginsat.com.au
    http://www.lifebeginsat.com.au/dont-need-1m-retire/
  3. Retirement Standard Detailed budget breakdowns September quarter 2017The Association of Superannuation Funds of Australia
    https://www.superannuation.asn.au/ArticleDocuments/269/ASFA-RetirementStandard-Budgets-Sep2017.pdf.aspx?Embed=Y
  4. Final decisions at retirementASIC’s MoneySmart
    https://www.moneysmart.gov.au/media/332959/financial-decisions-at-retirement.pdf
  5. Seniors and Relationships SurveyAustralian Seniors Series
    https://www.seniors.com.au/news-insights/seniors-and-relationships
  6. Risk factors for older peoplebeyondblue.org.au
    https://www.beyondblue.org.au/who-does-it-affect/older-people/risk-factors-for-older-people
  7. People Who Work After Retiring Enjoy Better Health, According to National StudyAmerican Psychology Association
    http://www.apa.org/news/press/releases/2009/10/working-retirees.aspx
  8. Part-time employmentASIC’s MoneySmart
    https://www.moneysmart.gov.au/superannuation-and-retirement/income-sources-in-retirement/part-time-employment

Posted: 10 Apr 2018

This is general information only and does not take into account your personal objectives, financial situation or needs. You should consider the relevant PDS available on this website prior to purchasing any product. Choosi offers insurance products from a range of brands but does not compare all products available in the market.

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