How to Prepare & Plan For Your Retirement

When it comes to retirement, everyone has their ideas about what they want. But the reality is, most of us have no idea how to accomplish that. So in this blog post, we'll discuss how to prepare and plan for your retirement – so you can make sure you get everything you want out of it!

Are you getting ready to retire in Australia? If you're like most people, you probably have many questions about what you need to do to prepare. How much money do you need to be saved up? What are the tax implications? Where should you live?

This post will outline some key steps to take to prepare for retirement. So whether you're just starting to think about it or you're already in the process of making preparations, read on for advice that will help make your retirement dreams a reality.

So could you sit back, relax, and let's get started?

Consider Your Life After Retirement

There are a lot of different aspects of post-career life to take into consideration. The following are examples of some of these things:

• where you envision yourself residing in your golden years
• if you wish to travel outside of Australia or just around the country
• If you wish to keep your car
• if you'd want to join a social group
• if you'd like to perform voluntary work.

Where To Live After Retiring

The location of your retirement home will depend on a number of factors, including the following:

• whether or not you own the place you live in
• the costs associated with any significant house maintenance or renovations
• your physical wellbeing.
• your ties to both your family and the community at large.

Travel When You Retire

If you wish to travel when you retire, some things you might want to consider are the following:

• where you plan to go vacationing
• how frequently do you wish to go out of town?
• how long of a trip do you anticipate taking?
• the associated financial burdens.

For some people, retirement means less travel. If you now own a car but anticipate driving it less in the future, you should probably think about whether or not you will continue to keep it. The following are some considerations worth giving some thought to:

• expenses incurred while driving your vehicle
• accessibility of public transportation in your neighbourhood
• price of using public transportation in your region
• there are options for community transportation in your region.

Before making significant choices, there is a lot of information to mull over. This list serves as a useful jumping off place.

Make a Retirement Plan

Good planning can increase your financial security in retirement.

After you've decided how you want to live your life, you should think about developing an appropriate financial strategy. Your approach, ideally, should provide things like the following:

• regular revenue to meet your usual expenses
• access to increase in capital over the long run
• a stash of funds set aside for use in case of unexpected events
• an acceptable level of both danger and reward

Because it will assist you in accomplishing your objectives, your retirement financial strategy is one of a kind.

Advice For Beginning Your Retirement Planning

Everyone's idea of the ideal retirement may be different, but everyone will agree that they need some kind of plan in place before they can relax and enjoy their golden years.

A recent study on retirement confidence found that doing so can make you feel more confident about your retirement, both financially and mentally. This can be beneficial for you if you are trying to prepare for retirement.

It is vital to take some time and think about what you want your lifestyle to be like when you are retired prior to beginning the process of planning for your retirement. For instance, do you wish to check off some items on your vacation bucket list or go on an adventure in your own state?

Do you intend to work in some capacity for a period of years after you officially retire, or do you anticipate retiring entirely? Or perhaps you are considering making some alterations to your house and finally want to master your passion. The fact that you can do whatever you want after you retire is easily the finest part about it.

You will have a far better chance of realising your vision if you first define it and then work backwards to create a set of attainable goals and an actionable plan.

1. Understanding when to access your super

Let's speak about how old people are. There are two crucial ages that you need to be aware of, namely your Preservation Age and your Qualifying Age. There is a distinction between the two ages, and you need to be aware of it.

Your Qualifying Age

This determines when you are eligible to apply for the Aged Pension from the Government. Your Qualifying Age is higher than your Preservation Age because, even if you've reached the age at which you can access your super, you still could not be old enough to qualify for the Age Pension. This is why your Qualifying Age is higher than your Preservation Age. You need to satisfy a number of standards in order to be eligible, including your income and your residency status.

2. Think about the amount you'll require for retirement

The age you are when you decide to retire is not the only factor to consider. In making your choice, you should give significant weight to both your present and your anticipated financial requirements.

Consider the kind of lifestyle you wish to have once you've reached retirement age; doing so will assist you in developing an accurate budget for your golden years. However, this might also vary depending on whether or not you are in a committed relationship with another person.

The Association of Superannuation Funds of Australia (ASFA) has provided a comprehensive retirement budget breakdown, which can provide you with an idea of how the implications of this can affect your preparation for retirement.

It will be easier for you to organise your finances if you have a good concept of how much money the typical person or couple spends during retirement. You may acquire an idea of how long your super might survive by using the Super Projection Calculator, which is another tool at your disposal.

It is never too late or too early to start taking efforts to maximise your retirement savings and investments. Consider making voluntary payments to your super while you are still working in order to build up your balance before you retire. Even adding a very modest amount can have a significant impact over a longer period of time. Any further contributions can qualify for a tax deduction as well.

3. Gain an understanding of the retirement income possibilities available to you

In retirement, the three primary potential sources of income are your retirement savings, the government pension you receive based on your age, and any assets you may have.

Super 

You can continue to benefit from your super even after you reach the age at which it is preserved for you. Depending on your circumstances, whether you wish to retire or remain working, examine choices.

Account-based pension – paying yourself from your super

You probably didn't realise this, but you don't have to take out all of your powers at once.

You have the choice of drawing a regular income from your retirement savings while those funds continue to be invested if you go with the account-based pension option. Additionally, anytime you require it, additional money will be made available to you.

Government Age Pension

Approximately 62%2 of Australians over the age of 65 are eligible for either a partial or full government pension based on their age. If you are qualified and have reached retirement age, receiving the Age Pension, which is a payment made on a regular basis every two weeks, might offer you additional financial support.

To qualify for the Age Pension, in addition to meeting the age and residency requirements, you will also need to demonstrate that you meet the income and asset requirements. If you're eligible, your Age Pension payments might augment your income payments from your super.

Assets

A portion of your income during retirement can also come from personal savings and assets, such as real estate and shares of stock in a company. Therefore, it is important to have a solid understanding of the function that your assets play in your retirement plan.

For instance, downsizing is an alternative that may be considered by homeowners in Australia. If you sell your primary residence because it is too large for your requirements in retirement and buy a smaller one, you might be eligible to put some of the money from the sale of your first residence into your retirement account.

Work even after retirement

It is up to you to decide when you want to retire, even though your Preservation Age and Qualifying Age dictate when you will be eligible to apply for the Age Pension and when you will be able to access your retirement savings.

There are a lot of people who get to the Preservation Age well before they are ready to give up working. Finding a balance between the end of your working life and the beginning of your retired life can be achieved by transitioning into retirement progressively.

Once you reach the Preservation Age, opening a TTR Income account in addition to your standard superannuation account is a simple method to continue working while also gaining access to your superannuation benefits. In addition, if you have a TTR Income account, you have the freedom to increase your take-home income, which enables you to reduce the amount of hours you work or increase the amount of money you save.

4. Find out how confident you are about retiring

In a recent poll conducted by Monash University, nearly 3000 Australians aged 50 and older were asked about their confidence levels regarding retirement.

According to the findings of the study, feeling secure about retiring is mostly dependent on the following four factors:

• financial awareness,
• health and wellbeing,
• social factors,
• and retirement awareness and planning.

According to the findings of the study, persons who were already in retirement showed higher levels of confidence than those who were on the cusp of retirement. The average score for Australians in retirement or approaching retirement was 63 out of 100.

Utilising the Retirement Confidence Index tool, you can find out how you scored and learn more about the overall findings.

5. Check your insurance cover

Even while the majority of super funds offer automatic insurance, it is essential to check that the coverage you have is appropriate for your needs. As you get older, your needs change. This may imply that the amount of insurance coverage you now have is either excessive or inadequate.

The departure of your grown children or a shift in your relationship status are two examples of the kinds of life events that could prompt you to reevaluate your cover story.

You might want to think about purchasing one of the following forms of insurance coverage depending on where you are in your life:

• Income Protection
• Total & Permanent Disablement (TPD) cover
• Death cover (also known as life insurance)

It is essential to keep in mind that insurance protection is not bundled in with either the Choice Income or the TTR Income accounts. Because of this, a number of members opt to keep their super account so that they can continue to make use of their existing protection.

6. When in doubt, consult others for guidance

Some companies provide retirement planning assistance in the form of webinars presented by their education team in addition to other forms of guidance and support.

To assist you in gaining a better understanding of how to prepare for retirement and what aspects of preparation are most important to pay attention to, they can provide some straightforward advice.

Reevaluating One's Approach to Retirement Planning

Because of the rising costs and increasing complexities of elderly care, our strategy for planning for retirement needs to be reevaluated.

Recognising and planning for the income requirements of retirement might help lessen the likelihood that one will reach retirement age without sufficient resources. This should include the resources to deal with the higher expense of care in the later phases of retirement, which can have an impact on when we are considered "retirement ready."

In the past, the standard method for preparing for retirement consisted of first determining the amount of money that would be required during retirement and then figuring out how much money would have to be saved. The majority of people operate under the assumption that their income will remain the same (or decrease), while prices will continue to rise.

The Three Phases Of Retirement

Many of us look forwards to retirement as a time in our lives when we can finally relax and enjoy the fruits of our labour during our younger years.

In actuality, retirees go through three distinct phases: the active period early on in retirement, the quiet phase in the midst of retirement, and the frail phase later on in retirement. As a result, it is essential to have a solid understanding of these three chapters and the ways in which your life expectancy will impact the necessity of making appropriate financial preparations.

1. Early chapter

When you reach approximately the age of 60, you enter the phase of your life known as "early retirement," during which you may maintain your lifestyle prior to retirement but begin to spend more time travelling, with family, or participating in leisure activities.

To keep yourself occupied during the early years of retirement, you might decide to take up some part-time employment or perhaps plan a significant trip abroad while you're still in good physical shape. During most of this chapter, you will still be able to meet the requirements of self-care and everyday living on your own.

The first phase of retirement is the initial period, which consists of "care-free" years during which the retiree can concentrate on travelling, spending time with family and friends, and generally enjoying life. The retiree's health and well-being are normally in good shape during this part of retirement, and the planning process has generally done a good job of taking into account the requirements of this period of retirement in terms of income.

2. Middle chapter

As you get closer to the age of 70, you can decide to give up any job responsibilities you already have and instead focus on travel and leisure activities that are located closer to home.

If you need to downsize or hire someone to help you maintain and care for your current house, you might find it more difficult to do so. Alternatively, you could employ someone to assist you with maintenance and care.

The second phase is known as the "silent" years, and it is during this time that our health begins to deteriorate, we may have some handicap, and our level of activity and, as a result, our expenditure decreases.

3. Late chapter

When you are in your early 70s, you will most likely begin transitioning into the later stages of retirement. Your health is more likely to decline, which means that your financial obligations will most likely increase as a result of this.

During this stage of your life, you will probably have a greater need for medical care or care for an elderly relative, and you will probably have fewer obligations related to your profession.

The third phase of ageing, also known as the "frailty years," is characterised by the development of severe disabilities. This can account for 17–25 percent of retirement years during which assistance may be required with activities of daily living, and more time is likely to be spent on dealing with the requirements of elderly care.

4. A better understanding of the stages of retirement

It will be easier for you to plan appropriately if you have a thorough understanding of the big picture of your retirement, which includes these significant periods. If you require the assistance of a financial planner in order to plan for your retirement, the team is here to support you!

Study Up On The Advantages Of Regular Lifetime Income

When you are no longer receiving a regular paycheck, having the security of knowing that you will continue to have an income for the rest of your life can be the difference between being anxious and being able to enjoy what should be the finest years of your life.

Given that around 700 people in Australia reach retirement age every single day, it is not surprising that the Australian government is putting a greater emphasis on ensuring that seniors have access to a variety of retirement income products that can assist them in funding their retirement.

How Might Income for a Lifetime Help You?

• Income that lasts for the rest of your life - when you set up a lifetime income, your regular payments will continue to be paid no matter how long you live, even if that's for more than 100 years. This is because the payments are based on the amount of money you put into the plan.

A helpful hint is that if you purchase some lifetime annuities, you may be able to choose a beneficiary or even your estate to get a guaranteed death benefit in the event that you pass away prematurely.

• You'll have the certainty that you'll always have the income to assist cover your basic living expenditures, allowing you to spend more time enjoying retirement and less time worrying about it. This will let you spend confidently in retirement, which will allow you to spend more time enjoying retirement.

• Income that is indexed to inflation, which helps to protect your standard of living – The rate at which the standard of living increases over time is what economists refer to as inflation. Your payments from your lifetime annuity can be linked to the yearly increases in inflation, which will assist you in continuing to afford the same things in the future that you can afford today.

The advantages of regular lifetime income

• Get paid for the rest of your life.
• Take care of the costs of everyday living
• Option to safeguard oneself against inflation

Preference For Ageing In Place

The majority of elderly Australians have a strong preference for ageing in place (continuing to live in their own homes) as opposed to moving into residential care.

The price of providing senior care has been rising at a rate that is significantly faster than inflation. As a consequence of this, the opportunities for home care (in terms of home adaptations) are also growing, which puts additional strain on the household budgets of retirees.

It's possible that over the course of our final 10–12 years of life, we'll require increasingly high levels of assistance, with the majority of people reaching their highest degrees of care dependency in their final 4–5 years. Because of this, you might need income to cover:

• home care costs
• modifications to the house to make it more accessible, such as enlarging entrances to accommodate wheelchairs and installing ramps.

It can be challenging to estimate the cost of elderly care, which can range anywhere from $100 to $5,000 per week (or $5,200 to $260,000 per year) depending on the level of care required and the circumstances of the family.

Access to government subsidies helps to minimise the cost that the user is responsible for paying by a significant amount; yet, having appropriate funds widens the options accessible and the capacity to choose the level and type of treatment that is received.

Fragility Is The Third Pillar Of Retirement Risks

When it comes to retirement preparation and determining the amount of resources that will be necessary, we often take into account two primary retirement risks: longevity risk and sequencing risk. The possibility of living longer than expected means that one's savings could be depleted sooner than expected.

There is a third component of retirement risk known as frailty risk, which, if disregarded, might potentially result in the depletion of savings earlier than anticipated, thereby making the longevity risk even more severe. In the third phase, our spending will be far higher than in the previous two, and the costs of providing care, in particular, may be prohibitively expensive.

When making plans for your elderly years, you should prioritise maintaining your independence and control, as well as the ability to remain in your own home for as long as possible.

• How you plan to finance the costs of elderly care, taking into account the fact that the legislation has been moving towards a higher user-pays basis
• Your readiness to access the equity in your home, as opposed to your inclination to keep the equity in your home as a legacy for your family, as it relates to the role that your home plays in the payment of fees associated with receiving elderly care.
• The capacity to rely on one's relatives and friends for the provision of care as well as financial support
• Should you decide to transition into residential care, what financial alternatives are available to you to cover the initial deposit on a room and the recurring expenses?

You and your financial advisor need to have a conversation about these topics if you want to ensure that your plans for a secure and comfortable retirement will carry you through all stages of retirement, including the years when you are feeble.

FAQs

1. What happens to my money once I pass away?

Lifetime annuities have a substantial death benefit that is paid out in one lump sum to the annuitant's estate or to beneficiaries designated by the annuitant. The death benefit can reach up to one hundred percent of the total amount deposited.

The length of time that has elapsed between the time that you made your initial investment in the annuity and the date that you died away is a factor that determines the maximum amount that your estate or beneficiaries could receive after your passing. In exchange for greater monthly payments, you have the option to disable this feature at your discretion.

2. What happens if I require access to the funds I invested?

Even though lifetime annuities are supposed to be retained for the rest of a person's life, there is a long withdrawal period that is based on your life expectancy during which you can seek to be returned a lump sum amount if there is a significant change in your circumstances.

3. Is there a tax on the income?

If you are above the age of 60 and have an annuity that was purchased with money from your superannuation, your income payments and lump sum withdrawals are normally exempt from taxation.

If you have purchased an annuity with your retirement savings, any income payments or withdrawals in a lump sum could be subject to some level of taxation (outside super). We will supply you with an annual PAYG statement that contains all of the information that you need to finish filing your tax return.

Take The Worry Test

Would you be interested in a source of income that lasts a lifetime? Find out by giving your answers to these four questions.

• Do you ever worry that you will outlive the money you've saved for your retirement?
• Are you concerned about meeting the costs of day-to-day life once you reach retirement age?
• Are you concerned that the Age Pension could not provide you with enough money to maintain your current standard of living in the future?
• Do you wish you had more financial security and therefore more peace of mind?

How did you go? Talk to your financial advisor right away if any of the questions above elicited a "Yes" response from you.

Speaking With A Specialist

Seeking the counsel of a financial advisor is a vital step to take if the idea of a lifetime income appeals to you. Your financial consultant can evaluate your situation and assist you in finding answers to several critical concerns, including the following:

• Should I invest in an annuity instead?
• What sort of annuity should I look into purchasing?
• When is the opportune time to make an investment?
• How much money should I initially invest in an annuity plan?
• How will my age pension be affected by the purchase of an annuity?
• What happens if I require immediate access to the funds in my account?
• When I pass away, what will happen?