27 Sep 3 Major Things to Consider in Retirement Planning
Traditionally, retirement planning assumed a retirement period of 25 years however people moving toward retirement today are generally healthier, more active and can expect greater longevity than earlier counterparts. It is key that people nearing retirement today plan to maximise their income and manage longevity risk.
Let’s address some strategies when considering your retirement planning and making your money last.
1. Directing surplus cash
If you still have a home mortgage, looking to clear that as much as possible for your retirement will really improve your cash flow outcome when you do retire.
If you have non-deductible debt such as a geared portfolio or perhaps an investment property you need to reconsider whether holding that property and that negative gearing benefit is still going to be there when you do retire. The main reason being once you are retired, particularly if you’re drawing down from your superannuation, from age 60 a lot of that money is going to be tax-free. The benefit of having that negatively geared property tends to not be there as much as it first was.
Consider making superannuation contributions. Boosting your super before you do retire is certainly going to help you with your retirement income once you do reach retirement – you can never have too much money going into retirement
2. Cash flow management
There aren’t many times in life when we have access to a substantial pool of cash, and it can be tempting to use a lump sum super payout to pay off debts, buy a new car or take a holiday. But this is a strategy that can leave you with little to live on in retirement.
You need to ensure you have a plan in place to manage your spending, diversify your income, direct excess cashflow wisely, make your money last and of course, have some fun with it. This is a vital step.
3. Lifestyle planning
What are you going to do in retirement? Have you done a budget? Do you really understand what you need to live on? Now that you’re retiring, what about your estate plan? These questions are critical before you get to the money because it’s what results from the estate planning decisions that will determine how to structure investments to make sure you get the most out of your money to manage the longevity risk.
The other question that is very important and is often not considered is, ‘Have you discussed this with other immediate family members?’. Retirement is often a time of considerable emotional upheaval where people can be particularly vulnerable to making rash decisions and destroying all their plans and intentions quickly.
Need help planning for your retirement? We can help, it’s what we do! Contact us or book an appointment for your free Financial Discovery Session with our Financial Adviser Chris Kelly via our appointment booking page on our website.