Preparing to retire is emotional and practical. Making a retirement plan can help you manage your finances, and cope better as your life and priorities change.
Make a retirement plan
Your retirement plan can be simple or detailed. Include:
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- Timing — when you want to retire. This could change, but it’s good to have a starting point.
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- Lifestyle and priorities — prioritise what matters most. For example, social activities and staying active, continuing or changing work, where you will live.
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- Income and living costs — estimate your daily living costs. Do a budget to prioritise your spending. Work out how much income you’ll have, and from where.
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- Plan for the future — if you can, boost your retirement income by contributing more to your super. Decide how to pay off your mortgage or other debts, and build a savings buffer. Check you have an up-to-date will and powers of attorney.
Think about when you want to retire
There’s no set age you need to be to retire. It will depend on your health, work options, finances and personal situation.
Are you retiring in ten years, two to five years, or next year? If you have a partner, when will they retire? Knowing how much time you have helps you make a retirement plan.
Talk about your retirement priorities with a partner, colleague or friend. If you need professional advice to plan for retirement, speak to us.
Consider your lifestyle and priorities
Set your priorities
Think about what your lifestyle will look and feel like. What are the things that matter most?
Consider:
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- your living costs
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- social life and recreation
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- staying active and healthy
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- volunteering or community participation
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- planning for changing health needs or aged care
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- supporting your family, children or grandchildren (if any)
Keep working, reduce hours or retrain
Continuing to earn an income, even part-time, can help your retirement savings last longer. If you want to keep working, options include:
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- Job Switch — explore options to retrain or seek part-time work
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- Transition to retirement — if you’ve reached your preservation age, you can use some of, and keep contributing to, your super while working
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- Work Bonus — if you get the Age Pension, you can earn up to $300 per fortnight from work before your pension payment reduces
Plan where you will live
If you own your home:
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- If you still have a mortgage, you could use some of your super (when available) to pay it off.
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- Consider downsizing to free up money. You could pay off your mortgage, support your lifestyle, or relocate to be closer to family or services. Before going ahead, check the tax impact and whether it will affect your government benefits.
If you’re renting:
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- You may be eligible for an extra payment if you rent and get payments from Centrelink, like the Age Pension. To find out more, see rent assistance on the Services Australia website.
Work out your income and living costs
How much money you’ll need for living costs in retirement depends on your lifestyle priorities and what you can afford.
For most people, your retirement income will be a combination of superannuation and the Age Pension. If you don’t have much super, you may be more reliant on the pension. If you do have super, think about how and when to withdraw it. You may also have some savings or investments.
Work out your living costs.
Consider:
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- Housing — rent or mortgage, rates, home and contents insurance, maintenance
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- Utilities — electricity, gas, water, phone, internet, streaming services
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- Food — fresh food, groceries, takeaway, dining out
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- Clothing and household goods — clothing, personal care, furniture, household appliances
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- Health and leisure — health insurance, health care, social activities, fitness, holidays, gifts
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- Transport — car registration, insurance and running costs, public transport
As a rule of thumb, try allowing for two thirds of your current living costs. This is a useful guide, that assumes reduced costs for work and that you’ve paid off your mortgage.
Your spending may be higher when you first retire. For example, if you plan to travel or update your home. You may also need to allow more for health care as you get older.
Prioritise the things that matter most in retirement.
Get your super income
You can get your super when you retire and reach your ‘preservation age’. That is between 55 and 60, depending on when you were born.
When you are eligible to withdraw your super, your main options are:
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- an account-based pension
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- an annuity
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- a lump sum
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- or a combination of these
You could also consider a transition to a retirement strategy. You can use some of, and keep contributing to, your super while working.
Contact your super fund to discuss your options.
Claim government benefits
From age 67 (or earlier, if born before 1957), you may be eligible for government benefits such as:
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- Age Pension
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- Pensioner concessions
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- Health care benefits
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- Tax offsets
For questions about government benefits, call Centrelink’s older Australians line on 132 300. Ask to speak to a Financial Information Service (FIS) officer (for free). The helpline is open Monday to Friday, 8:00am to 5:00pm.
See how long your super and Age Pension will last.
Add in savings and investments
If you have money in savings, this could top up your retirement income.
If you have investments like shares or investment property, think about whether to keep or sell. Check the costs, tax impact and whether it will affect your government benefits.
Plan for the future
Grow your income
If you can, consider contributing more to your super.
Save for an emergency
Save an emergency fund to give yourself a safety net for unexpected bills like repairs or medical costs.
Pay off debt
If you have a mortgage or other debts, consider how best to pay them off. For tips on how to do this, see get debt under control.
Make an estate plan
Decide what you want done with your assets when you die. Check you have an up-to-date will and powers of attorney, and a nominated beneficiary for your super.
Get help if you need it
To seek professional advice about your plans for retirement, reach out to our team here to discuss your unique situation.
Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/retirement-income/prepare-to-retire
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