Once the age of sixty-five is on the horizon… or if you think you have enough money in the bank, you will probably start thinking about stepping away from the workforce.
Retiring can be the best phase of your life; your time is your own and you shouldn’t have to worry too much about making money. There is no more morning alarm and no more dealing with the politics of the workplace.
But are you as ready to retire as you think? Here are some indicators that you are ready to step away from earning a regular income.
You are ready for retirement if:
You don’t have many debts
If your family home is paid for and you don’t have a significant amount of debt, you are likely to be ready to live on a retirement-level income.
Often, a high percentage of spending goes towards repaying debts, credit cards and loans. If you can clear these amounts, you will need less money each month.
Still in a lot of debt? You may have assets you can sell to pay down the amounts. Preparing for retirement is much easier if you can clear away your debts.
Your superannuation is healthy
Unless you are happy to rely on the government aged pension, your superannuation is the money you will use as ‘income’ after you stop working.
You’ll need to sit down with a financial advisor and figure out what type of income will allow you to live comfortably in retirement. This will involve creating a budget that accounts for daily expenses, ongoing costs like maintaining a vehicle, paying for holidays and medical bills, and having emergency funds.
Next, you’ll need to think about how many years you expect to live for after retirement. Your superannuation should be set up to provide retirement income for that number of years. Unfortunately, it’s impossible to predict this figure with absolute certainty but it’s still worth it to work out a plan that takes you to a distinguished age.
You have access to cash
Many people have all their money tied up in their primary residence but as the saying goes, “You can’t eat your house”.
As part of your retirement strategy, you will need money to live on. This may involve downsizing to a smaller property and freeing up the equity in your home.
Talk to a financial advisor about strategies to boost your super balance when you sell your house. You may be able to move some of the profits into your super fund, depending on your current age.
You have a plan
The current recommendation for couples, around age 65, who are looking to retire today, would need an income of $63,799 per year to lead a comfortable lifestyle*. You may decide you need more than that or that you can live on less.
*Note, a comfortable retirement lifestyle is said to enable an older, healthy retiree to be involved in a broad range of leisure and recreational activities.
Choose an amount and do your sums to see if you will be able to live on your savings and/or investments. There are a number of strategies that will see you being cash-flow positive in retirement and it’s never too early to apply them with the help of your financial advisor.
Don’t forget to consider things like the cost of aged care. The catch-22 of aged care in Australia is that if you can afford to pay for it, you have to. However, being able to contribute means you will be able to access a better quality facility or more hours of at-home care per week.
You have taken note of your mindset and health
Nobody is forcing you to retire! You may decide retirement is not for you and that you want to keep working. If you’re over 65, talk to your financial advisor about the best way to invest the money you’re still earning for when the day comes.
Alternatively, you may be looking forward to stepping away from work and have a number of things you want to achieve like spending more time with your grandchildren or travelling the world. If this is the case, even if you are not yet 65, set some goals and go for it.
Everyone’s retirement plan is different. There is a lot to get your head around and there are dozens of ‘roads’ you can go down to prepare for this stage of your life. What’s most important is figuring out a strategy and applying it sooner rather than later. When you have a clear outline of what to do, you’ll be able to retire on your own terms.
Want advice so you can be ready for retirement? Speak to us today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice.
