In today’s fast-paced world, Australians increasingly recognise the importance of conscious financial planning. The economic landscape demands strategic decisions about where to invest hard-earned money.
Many individuals juggle financial responsibilities for their families, manage growing businesses, and strive to secure their financial future.
Amidst these commitments, it is crucial to remember the significance of securing a comfortable retirement for yourself and your loved ones.
Retirement represents the golden era of life. A time when you can pursue your dreams, free from the shackles of meetings, work hours, and the stress of daily life.
Early retirement is a coveted goal for many Australians but often eludes them due to insufficient planning. While the common assumption is to accumulate wealth, achieving early retirement entails much more.
We encourage you to consider the following essential points for this journey. Contemplate utilising a financial advisor to guide you toward a financially secure and fulfilling retirement.
When Should I Retire?
One of the critical questions to address when considering early retirement is: when should you retire?
There is no universally defined age for retirement; instead, it depends on factors like your health, available work opportunities, financial status, and personal circumstances.
Life expectancy is unpredictable, but financial decisions can be made based on investment returns and savings.
A helpful approach is reducing your expenses to increase your super fund savings.
If you own your home and are relatively healthy, the Association of Superannuation Funds of Australia (ASFA) estimates that single Australians require an annual income of $44,400. At the same time, a couple needs $62,800 for a ‘comfortable’ retirement.
However, the amount you need for retirement is a personal matter closely tied to your current lifestyle and future retirement aspirations.
While conducting your estate planning, including a conservative and aggressive investment strategy is a good idea. We can never guarantee what circumstances will be at the pre-determined time of retirement, so being flexible is essential.
Where Will Your Retirement Income Come From?
While working, your regular income primarily stems from a single source—your salary from your employer. In retirement, your payment may come from multiple avenues:
1. Your superannuation savings
2. The Government Age Pension
3. Your savings
4. Other investments outside of your super
5. Any salary you earn if you choose to work during retirement
If you are contemplating downsizing your home or exploring options like a reverse mortgage or home equity release product, weigh their pros and cons to make informed choices.
You could pay off your mortgage, support your lifestyle, or relocate closer to family or services. But check the tax impact and whether it will affect your government benefits.
You could also consider a transition to a retirement strategy. You can use some of, and keep contributing to, your super while working.
Work on increasing and diversifying your passive income streams, such as rental income, to subsidise retirement income.
Determine if a Self-Managed Super Fund is the right option in our free downloadable e-book.
What Must Your Retirement Funds Cover?
Step 1: Calculate the Expenses
Estimate the amount of money required to cover your living expenses during retirement. Consider the following:
Housing — rent or mortgage, rates, home and contents insurance, maintenance
Utilities — electricity, gas, water, phone, internet, streaming services
Food — fresh food, groceries, takeaway, dining out
Clothing and household goods — clothing, personal care, furniture, household appliances
Health and leisure — health insurance, health care, social activities, fitness, holidays, gifts
Transport — car registration, insurance and running costs, public transport
Additionally, it accounts for potential increases in general living expenses over time. As well as the overall rise in health-related costs and perhaps private health insurance.
Step 2: Calculate the Duration
Determine your desired retirement age and project your annual post-retirement expenses. For everyone born after 1964, particular circumstances aside, you may access your superannuation at age 60.
Once you understand your estimated retirement expenses and know when you would like to retire, calculate the time you will need to cover said expenses before you can access your super.
This time is when you will need to ensure external income. Once you enter your ‘super years’, ensure you have enough to cover your expected lifespan.
If your projected superannuation balance appears sufficient to cover your expenses, you are halfway to achieving your goal of early retirement.
Enabling financial well-being in your golden years
In the pursuit of early retirement, careful planning is paramount.
Each step requires thoughtful consideration, and guidance from financial experts can make all the difference.
At Rispin Group, our financial planning experts are dedicated to helping you build a solid financial foundation for you and your family.
Book a financial planning meeting with Rispin Group today and achieve financial freedom to live the life you want.
Your golden years await – it’s time to embrace them with confidence.