Retirement planning is a journey every couple must go on, but for those with a big age gap, it’s a bit more complicated. Talking to a financial adviser to navigate the income and asset tests for the Age Pension is a must. As financial advisers to Newcastle and the Hunter region, we’ve helped many couples through this one, and we’ve found success starts with having the conversations.
Age-Gap Retirement Planning and Age Pension Needs Extra Care
When partners are at different life stages, they have different priorities, timelines and energy levels. These differences can impact everything from daily routines to long term financial planning. But with some thought and planning you can create a retirement that works for both partners. Planning for the retirement lifestyle you want is key as it will impact your long term financial planning and the transition into retirement.
Here are five conversations to have with your partner to get your retirement planning off to a great start:
What’s Your Dream Retirement Lifestyle?
Start by asking each other: “What does a happy retirement look like for us individually and as a couple?”
Some questions to consider:
- Do you want to travel the world or stay at home?
- What hobbies do you want to do?
- What are your non negotiables for a happy retirement?
Take time to write down your individual visions, then share them with each other. Look for the overlap and discuss how to accommodate the differences. The goal isn’t to have identical visions but to have a shared plan that honours both partners’ dreams. Defining your ideal retirement is a key part of your retirement journey.
2. When Do You Retire?
The when question gets more complicated with an age gap. Consider:
- Do you retire together or stagger your retirements?
- Can the older partner work a few more years?
- Can the younger partner work flexible hours?
- What are your long service leave entitlements and how do they fit in?
- How does the preservation age impact your decision? The preservation age varies between 55 and 60 depending on your date of birth and determines when you can access your super and will impact your retirement planning.
Remember, retirement doesn’t have to be an all or nothing decision. Many couples find success with a staged approach that balances career goals with time together.
3. Staying Connected Through Different Life Stages
When one partner retires and the other keeps working it can create new challenges in the relationship. Talk about:
- How will you feel like a partnership?
- What can you do together despite different schedules?
- How will you manage the household during this transition?
- What new rituals or routines can you create?
The key is to find ways to stay connected and maintain your shared sense of purpose even as your daily routines diverge.
4. Managing Different Energy and Mobility
Age gaps often mean different energy and mobility levels which will impact your lifestyle choices. Consider:
- Should you do the physically demanding activities earlier in your retirement?
- How will your travel plans change over time?
- Would an age friendly home benefit you both in the long term?
- What can you both do regardless of physical ability?
Planning for these differences will help you create a lifestyle that works for both partners at every stage.
5. Your Retirement Income Worries
Talk about your biggest retirement worries:
- What keeps you up at night?
- How do you feel about health challenges?
- What support systems do you want to put in place?
- How can you help each other feel more secure about the future?
Being open about your fears will allow you to address them in your retirement planning. Adjusting personal contributions can help with financial worries in retirement.
Other Retirement Considerations
Your Finances
Your financial situation is a key part of your retirement planning. You need to know your income, expenses, assets and debts to work out how much you need to save for retirement. Here are the steps to help you assess your financial situation:
- Gather Financial Documents: Collect all your financial documents, including bank statements, investment accounts and loan documents. This will give you a full picture of your financial position.
- Calculate Net Income: Work out your net income, including any government benefits such as the age pension. Knowing your income sources will help you plan your retirement budget.
- List Expenses: Make a list of all your expenses, including living costs, debt repayments and entertainment expenses. This will help you identify where you can cut back if needed.
- Evaluate Assets: Calculate your assets, including superannuation balance, investments and property. Knowing your assets will help you know how much you can live off in retirement.
- Determine Debts: List your debts, including credit card debt, personal loans and mortgages. Knowing your liabilities will help you plan how to manage or pay them off before retirement.
By assessing your financial situation, you can cut back on expenses, increase income and optimise your investments to achieve your retirement goals.
Retirement Income Strategies
Retirement income strategies are designed to help you get the most out of your retirement income and achieve your retirement goals. Here are some retirement income strategies:
- Account-Based Pension: An account-based pension allows you to draw down on your superannuation balance to fund your retirement. It gives you flexibility on how much you can withdraw and can be tailored to your needs.
- Government Age Pension: The government age pension is a fortnightly payment to eligible Australians who have reached 66. It can be a big part of your retirement income if your super and savings are limited.
- Investment Earnings: Investment earnings can provide a regular income stream in retirement. But you need to consider the risks and fees involved in investing to make sure it’s aligned with your risk tolerance and financial goals.
- Tax: Tax is critical in retirement as it can impact your retirement income. Understanding the tax implications of your retirement income strategies, such as the concessional contributions cap and transfer balance cap, will help you get the most tax free income.
By knowing your retirement income options, you can create a personalised retirement income strategy for yourself.
Estate Planning and Aged Care
Estate planning and aged care are important parts of retirement planning. Here are some things to consider:
- Estate Planning: Estate planning is about creating a plan for what happens to your assets when you die. Consider your personal circumstances, including your family, assets and debts. This will ensure your wishes are met, and your loved ones are looked after.
- Aged Care: Aged care is about planning for your care needs in retirement, including accommodation, healthcare and social support. Consider your living costs, income and assets when planning for aged care. This can include looking into aged care facilities, in-home care options and the costs involved.
By considering estate planning and aged care, you can make sure your retirement plans are comprehensive and tailored to you and your goals.
Next Steps
Remember, these are just the starting point. Every couple is different, and there is no one size fits all solution. As your local Newcastle financial planning team, we can help you turn these conversations into a practical retirement strategy for both of you.
Part 2 is coming soon, where we’ll share the story of Sarah and John, a local couple with a 13-year age gap and the strategies they used to create their retirement plan.
Ready to Start Your Planning Journey with a Financial Adviser?
If you and your partner are planning for retirement with an age gap, we can help. Our team can help you create a personalised strategy for both of you. Contact our Newcastle office to book an appointment and start your planning journey.
