Retirement planning matters to all of us, but it isn’t always an easy subject to think about.
In your 20s, retirement can feel so far away that there’s little point worrying about it. In your 40s, plenty of other things are competing for your attention. And if you’re approaching retirement, you might be wondering whether it’s too late to do anything useful.
The good news? It’s never too early or too late to start. Here are the questions worth working through, whatever stage you’re at.
Decide when you’d like to retire
The first question is a simple one: when would you like to stop work? You might have a very clear answer, but plenty of people don’t, and that’s fine.
Either way, your timeframe matters: someone in their 20s could have 40 years or more to build towards retirement, while someone in their 50s has a much shorter runway. And retirement doesn’t have to mean stopping altogether. Some people finish up at 65, while others cut back their hours or keep working part-time for longer. If you’re thinking about easing into it, our step-by-step guide to transitioning to retirement explains how that can work.
Picture what retirement will look like
Your retirement might involve plenty of travel and eating out, or it might be a quieter life close to home here in the Hunter. Neither is better than the other, but the lifestyle you choose has a big influence on the income you’ll need.
Work out how much you might need
There’s no magic number that works for everyone. Start with the everyday costs, because food, utilities, insurance, transport and healthcare don’t disappear when you stop working. Then add the extras, such as helping children or grandchildren, renovating the home or the occasional holiday. It’s also worth remembering that the cost of living tends to rise over time, so an income that feels comfortable today may not stretch as far in 20 years.
Look beyond your super balance
It’s easy to focus on the number in your super account. But the bigger question is what that money can provide once you stop working. Retirement planning is really about creating an income for life after work, and that income may need to last 20 or 30 years, or even longer.
Map out where your income will come from
For most Australians, super will be an important part of the picture, but it may not be the only piece. Your retirement income could come from super, savings, personal investments, an investment property and, if you’re eligible, the Age Pension. Building up savings and investments outside super is part of our wealth creation advice.
Your home matters too. Owning it outright can mean lower housing costs, while carrying a mortgage into retirement adds another expense to plan for. Some people eventually downsize, while others want to stay in the family home. Neither choice is wrong, but each affects your finances differently.
Plan for your money to last
This is one of the biggest challenges in retirement planning, because you don’t know exactly how long your retirement will last or how your spending will change. You might spend more on travel and entertainment in the early years, while healthcare and other costs could become more important later. That’s why retirement planning isn’t simply about building a lump sum but about thinking through how your money can provide an income throughout your retirement.
Keep your plan up to date
Your answers will change as your life does, which is why retirement planning isn’t something you do once and forget about. A good habit is to come back to the same questions every year or two:
- When would I like to retire?
- What sort of lifestyle do I want?
- How much might it cost?
- Where will my retirement income come from?
- How long might my money need to last?
The sooner you start asking the questions, the more time you have to work out the answers.
Retirement planning FAQs
Here are answers to some common retirement questions. You’ll find more on our FAQs page.
How much do I need to retire?
There’s no single number. It depends on the lifestyle you want, whether you’re single or a couple and whether you own your home. The ASFA Retirement Standard, from the Association of Superannuation Funds of Australia, publishes “modest” and “comfortable” annual budgets and updates them every quarter. Moneysmart’s free retirement planner can also give you a rough idea.
When can I access my super?
Generally from your preservation age, which is 60 for anyone born after 30 June 1964 (a little earlier if you were born before then). From 60, you can usually access your super once you’ve left a job, and from 65 whether or not you’re still working. Before 60, access is limited to specific situations such as severe financial hardship. The ATO explains the rules for withdrawing your super.
Can I still get the Age Pension if I have super?
Some retirees receive a part pension on top of their super. The Age Pension is means tested, so Services Australia assesses your income and assets and pays you under whichever test gives the lower amount. From Age Pension age, which is 67, your super is generally counted, but your family home generally isn’t. Check the Age Pension rules early rather than assuming you won’t qualify.
Is it too late to start planning at 55 or 60?
No. Even a few years can make a real difference. You could work a little longer, add extra to your super or trim your spending. There are limits on how much you can contribute to super, so get advice on your options before you act.
Should I pay off my mortgage before I retire?
It depends. Heading into retirement without a mortgage can mean lower living costs and less to worry about. But using your savings or super to clear it could leave you with less to live on, and can change how much Age Pension you’re entitled to. Our article on paying off your home loan early covers the trade-offs.
Do I need a financial adviser to plan for retirement?
No, you can make a start on your own, and free tools like the Moneysmart planner above are a good place to begin. An adviser can help when things get more complicated, such as how much you can comfortably spend each year, how your super, savings and the Age Pension fit together, or what to do with your home.
Get some help putting the pieces together
If you’re not sure where to start, a financial adviser can help you understand where you stand today and how the different parts of your retirement plan could fit together.
This is the sort of thing we cover with clients across Newcastle and the Hunter as part of our retirement planning and financial planning conversations.
Talk to Virtuous Wealth
If you’d like a hand working out what retirement could look like for you, we’d love to have a chat. Get in touch with our Newcastle team to book a no-obligation conversation.
This article provides general information only and does not take into account your personal objectives, financial situation or needs. Before acting on any information, you should consider its appropriateness, having regard to your own circumstances, and seek personal financial advice from a licensed adviser.
