Thinking about retirement? What you need to organise first

Written by financial expert Rachel Smith for Choosi. The below information is to be used as a guide only and does not constitute financial advice. Please do your own research and consult a professional for any financial matters.

If retirement age is looming, you may be feeling a mixture of excitement, relief – and stress! After all, there can be a lot you need to organise before you bid farewell to the world of work forever. And that’s true of everyone, no matter what age you retire at.

Making a game plan might include figuring out how you want to transition to retirement (slowly or in one go), how you’ll fund your retirement lifestyle and the documents and safeguards you’ll want to have in place. Here’s some of the things you might want to consider when thinking about your future plans.

How do you want to retire?

While many people might love the idea of ditching the 9-5 and having their days free to pursue hobbies, travel, visit family or be a more involved grandparent, it doesn’t have to be an all-or-nothing decision. In Australia, you can retire on your terms with a strategy such as transition to retirement (TTR). That means you can work part-time after your preservation age and have access to super payments at the same time. Your preservation age is generally the earliest age you can access your super, and it's calculated based on your date of birth. It's called preservation age because your super is a preserved benefit – locked away until you reach a certain age. You can find more information on your preservation age at the Australian Taxation Office’s website.

So making the decision on how retirement might look for you is important – and it also relates to how you want to support yourself. Life expectancy rates in Australia are around 80.7 for men and 84.9 for women, so if you retire around 65 you’ll need to factor in how you’ll live and fund your lifestyle for at least 20 years or more.

How much do you need to retire?

According to The Association of Superannuation Funds of Australia's (ASFA) estimate of how much money you'll need in retirement, to live a comfortable lifestyle you’ll want to have access to about $62,562 per year via super or other means as a couple, while a single will need $44,224 per year (this assumes you own your own home, and are receiving partial support from the Age Pension).

If you’re eligible for the Age Pension, it may ease the burden of expenses in your retirement (from riding the bus to paying the gas bill). The amount the Age Pension pays depends on your income and assets – and whether you’re single or have a partner. The maximum amount singles receive per fortnight is $868.30, while couples receive $1,309 per fortnight.

To check when you can access your super and the age pension this calculator may be useful.

Retiring younger? How to start preparing early

You don’t have to wait until 65 to retire – you can actually retire any age you like, as long as you have the means to support yourself without having to work.

You should be aware, however, that this doesn’t mean you can access your super at any age, in fact, you’re only able to access your super at preservation age (55 for anyone born before 1 July 1960 or between 56-60 for anyone born after that date). To access the bulk of your super as a lump sum, you’ll also need to have officially resigned from your job.

If you’re considering retiring early, you may wish to bump up your super contributions, either via salary sacrificing or making non-concessional contributions (such as adding an inheritance or tax return straight into your super). You may also wish to think about downsizing if you’re an empty-nester – you can then funnel any extra funds into your super as a downsizer’s contribution. And paying off debts as early as possible is a great idea, too.

What if you retire but need to return to work?

Although retirement is something many Australians look forward to, there’s a growing trend of ‘un-retirees’ returning to the workforce. This could be to bring in extra income, to stay active or engaged or because you want to try a new type of career or industry. You may even find that working gives you a sense of purpose and that you enjoy it!

You’re entitled to work less than 10 hours a week and still be officially retired, and you should have full access to your super if you do this. There are also incentives such as the Work Bonus for people over pension age, who may want to go back to work, even part time.

However, if you want to work more hours or possibly even return to work full-time, it’s a good idea to chat to an accountant or financial adviser about how this might affect your super or your pension.

Insurances you may need to consider

Getting your affairs in order may not sound like the most exciting activity, but if you’re nearing retirement it’s something you’ll have to tackle.

Ensuring you have a legal will and considering having insurance in place is important. Life insurance can help provide peace of mind for you that any loved ones who rely on your income or financial support will be financially protected. If you pass away, the policy pays out a lump sum to your nominated beneficiaries (which can usually be up to $1 million depending on the age when the policy is taken out), giving them the means to cover debts and ongoing living expenses.

Or, you may wish to consider funeral insurance, – especially given the cost of funerals have risen substantially in recent years. A funeral insurance policy also pays out a lump sum (usually anything up to $15,000), which could be used for covering funeral costs or final expenses in the event of your death.

Remember, one size does not fit all!

As you can see, there’s actually a lot of planning that goes into retiring – and it’s not a one-size-fits-all stage of life. You can retire part-time, retire completely, or even retire then decide you want to return to work for a few hours a week. How you choose to carve out your retirement lifestyle is totally up to you!

We hope this has given you some pointers for making a plan that works for you and your circumstances. Happy retirement!

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Choosi works with a range of insurers to arrange cover on their behalf, but you should be aware that they do not work for the entire market. This is general information and does not take into account your financial situation.