Retirement is generally identified as the age at which the government aged pension is available to an Australian resident. The current age to receive this benefit is 66 but with many people aspiring to retire earlier than this it may be practical to dive deeper into retirement planning and financial products.
Establishing a comfortable nest egg for retirement is a large financial challenge that the majority of people have to face throughout their working life. It is a challenge that has the potential to creep up on people leaving them unprepared for retirement.
Having a plan can ensure an individual stays ahead with their retirement savings. Here are some steps you might like to take that are key to retirement planning.
1. Current Situation Assessment
Regardless of where an individual is in their retirement journey, it may be beneficial to complete an honest assessment of their current financial situation. Establishing this information can assist in creating a financial plan.
When commencing this step, an individual may start with checking their super fund balance that is already set aside as retirement income. Determining balances across these types of accounts and consolidating them has the potential to save on fees and insurances over a long term period.
Once the current financial situation has been assessed a person may like to create a plan of action for retirement.
2. Consider Retirement Goals
Setting financial goals can be a significant factor when planning for retirement. For example, a person wanting to downsize their property and live a modest lifestyle in retirement will have different financial needs to someone who aspires to travel extensively.
Creating a regular budget to estimate prospective expenses during retirement can assist with delegating income, age pension and cash flow. This could include housing, interest rates, bills, groceries, dining out and recreational activities. Health, medical expenses and health insurance can also be a prevalent part of retirement so it can be beneficial to factor them into a budget.
3. Establish A Target Retirement Age
Once financial information has been gathered a target retirement age can be set. With this information, a realistic age to retire can be calculated. This will differ depending on individual circumstances. Someone who is prepared financially and wanting to exit the workforce may choose to retire as early as 50 or as old as age 65 to 70 if not.
Life expectancies are continually increasing therefore people in good health may want to plan their retirement estimates to fund three decades or more. Spending habits are not the only element to be considered in retirement planning. There is also the important factor of how many years retirement may last.
A retirement that lasts 30 to 40 years will look different to one that lasts less than 20. With early retirement and working part-time becoming a largely popular goal of many workers, it is key to set a reasonable target age. Having the optimum balance between a financial portfolio and the length of retirement has the potential to provide adequate support throughout retirement.
4. Start Saving Now
When it comes to saving money for retirement there is no time like the present. Although many may want to take action as soon as possible it is never too late to start saving and investing money.
Some saving initiatives to consider maybe dining out less often, lower-cost travel options and conscious grocery shopping. Researching more ways to save money may help spare up more cash for retirement.
Before visiting a financial advisor it could be beneficial for a person to decide exactly what they would like to gain from the experience. Every individual is in a different stage in life, has a varied amount of money and are aspiring to achieve their own personal goals.
5. Consult A Retirement Financial Advisor
Consulting a financial advisor for personal financial advice may be the next appropriate step for successful retirement planning. A highly skilled planner could have the potential to assist with choosing risk-appropriate investment options as well as identify estate planning issues.
Once an individual has followed their chosen steps they may want to find an adviser who offers services best suited to their current situation. To find out exactly what a financial advisor offers an individual has the opportunity to read their financial services guide (FSG). This should be on their website or alternatively, a person may request a copy of it.
A financial advisor should get to know a client, keep them well informed and help them achieve their goals at an appropriate risk. There are plenty of reasons to liaise with a financial advisor. These might include retirement planning, budgeting, super, estate planning, insurance and taxation.
There are multiple options in regards to financial advice that could include single-issue advice, comprehensive financial advice and ongoing advice.
Types Of Financial Advice:
Single-issue Advice
Assistance with a single financial query. For example, this could be the optimum super balance for retirement.
Comprehensive Financial Advice
A comprehensive financial plan to set and reach possible financial goals. For example, this may include retirement planning, super, investments and savings.
Ongoing Advice
A financial plan that is regularly reviewed and monitored. This may include ongoing advice for retirement planning.
Financial Services Guide
To find out exactly what financial advisers offer they should have their Financial Services Guide (FSG) on their website.
This should include:
- The various services they offer
- Their AFS license number
- How they charge
- Links to product providers
- The owner of the company
Once an individual has established what sort of financial advice they might proceed with they may like to work more closely with their chosen advisor to create their retirement plan. One of the elements of retirement planning is investing, which an individual may like to discuss in their consultation.
6. Diversifying Investments
Investing the money set aside for retirement has the potential to grow a portfolio substantially. Diversification is an investing strategy that can decrease the risk of investment by spreading investments between multiple organisations. For more information here is Investment Diversification For Wealth Management.
If a person has little saved for retirement following these steps has the potential to turn things right around. Being intentional and planning now can help to benefit an individual during retirement.
There are plenty of factors to consider when it comes to planning for retirement including the current situation, goals, target age, saving and investing. An individual may like to consider the type of advice they would like to receive before they book an appointment. Consulting a financial planner may be your next port of call when it comes to your retirement planning.
This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.