An effective retirement strategy should be clear from the beginning – however, since so many things change throughout our lives and in the world, planning to spend our golden years under the sun may seem more and more like a distant dream as time goes on. Many people struggle with putting together and sticking with a plan that works for them while trying to find answers to the many questions they have along the way.
If this sounds like you, don’t fret – we’ve provided answers to the top 5 most commonly asked questions about retirement planning. Plus, you’ll learn how to find these answers on your own, with a little help from your financial planner, if necessary. A savvy planner will always be more hands on, which is recommended. No one is expected to know everything, but knowing where to find the right information and arming yourself with the right tools play a key role in the success of your wealth management.
Let’s take a look at the most common questions asked about retirement planning and learn how and where to find the answers to those questions.
How much should I save for retirement?
It’s a safe bet that every financial planner from across the globe hears this question on a daily basis from their new and prospective clients. It is also safe to assume that the majority of people really have no clue what amount they need to save for retirement, especially when they first get started. A good planner or advisor will not necessarily provide you with an exact figure – instead, they will take your entire financial picture into account and ask you some key questions about your “big picture” plan.
The more specific you get about all aspects of your plan, the easier it will be to come up with a figure and goal you are happy with. The important thing to remember is that plans and goals can be adjusted as time goes on.
What do I plan to do during retirement?
This a good place to start when putting together a solid retirement plan that works for you, because let’s face it, how you plan to spend your time and money during retirement could ultimately decide a rough figure to start with. These goals will vary for everyone, which is why it is important for you to narrow down what you need in order to live out your retirement years the way you want.
Other factors to consider during this planning process is the age at which a person plans on retiring. Naturally, retirement looks different for someone planning to retire in their 40s compared to someone planning to retire at age 65 or even 70. The numbers will be different because projected years left to live will be different, health factors will differ, interests will be different, and, naturally, expenses will vary among each age group as well.
To help make this planning process a little easier and to help you get more specific, here are three points to consider during the planning process:
- Do I require my assets to outlive me? This could easily apply to a variety of future plans. Some examples could include: paying for your grandchildren’s education, leaving an inheritance, or leaving a certain amount of money as a charitable donation.
- How will taxes affect my goals? While you generally can’t avoid paying taxes all together (regrettably), having your financial planner work closely with your accountant to plan how certain types of income and assets can be structured may help you reduce the tax you do have to pay. These things can easily be discussed in greater depth with your financial planner when you solidify your retirement goal.
- Are my goals reasonable? Having goals and ambitions is great – however, some ambitions may have some major consequences down the road. An example of this could be expecting a large amount of retirement fund growth in a very short period of time. This isn’t always possible without considerable risk, so it is probably best to be reasonable about what you can do over the short and longer-term.
How long will my retirement years last?
Now that you’ve got a better idea of what you plan on doing during retirement, the next important factor to consider during the planning process is how long you will need to support yourself during retirement. This is not an easy one to answer for obvious reasons. An easier way of looking at it is what you plan on spending annually on what you need and what you want and multiply that figure by the number of years you expect to be alive.
Again, not an easy subject to address, but it will make planning so much easier and will help answer the number one question regarding how much you should save. Generally, many clients take a look at the age they expect to retire at and project how long they expect to live beyond that point. It is not easy to get that number right or exact, but what could help is taking a look at your personal health situation and comparing it against the average life expectancy for others in your age group and with similar health profiles.
Comparing this data may require a little more digging than you opted for, but again it will help make it a little easier to narrow down how long you can expect your retirement years to last. Additionally, considering things such as hereditary illnesses and health issues, and whether or not you go for your regular check-ups would also be a helpful indicator.
It’s a morbid subject, but these are just some examples and will not necessarily guarantee complete accuracy, although they can help you narrow down a more accurate time estimate.
What is the Best Retirement Saving Strategy?
Out of all of the questions most financial planners are frequently asked, this one is also at the top of our list for commonly asked retirement planning questions. The great thing about this question is that, in most cases, it is generally a lot easier to answer and tends to require a lot less digging and probing to help us get to the heart of the matter. It often boils down to how (and how much) you already save, when you’re looking to retire, and if you are contributing to an SMSF or not.
Questions to consider:
- How much am I saving into SMSF each month and how much do I already have in super?
- Am I willing to sacrifice something to boost my super contributions?
- What kind of health benefits do I have and what will I need?
- Do I have investments and what is my current net worth?
- Am I willing to invest in or contribute to other funds?
- Do I own any property and what is it worth? Do I plan on selling it?
- How old am I and when do I plan on retiring? This is essential because this will determine the amount of time you have to reach your goal.
These are just some example questions and every situation is unique. Some of these questions may not apply to you specifically or to every situation, but they are valid questions to consider when putting together a strong retirement savings strategy and will help you easily answer the “how”.
Should I invest?
While investing is entirely up to you, and not necessarily required to reach your goals, seeing your options and learning how some investments may have an impact on your retirements goals is definitely worth looking into.
Talking with an investment advisor, such as the team at Ethica Private Wealth Specialists, will help you find answers to any burning questions on the investment side of things, as well as gain recommendations on a course of action specifically tailored to your unique circumstances and goals.
Basically, investing will come down to the risk you want to take, how long you have to reach your goals, and whether you feel you can comfortably invest while saving for retirement all at the same time. These are all great things to consider before sitting down with an advisor, but a free discovery session with an advisor will most likely help you gain a clearer understanding of what may or may not work for you in the long and short term.
At Ethica, we understand that planning for the future can be a little overwhelming as it is not always easy to know where to begin or how to set yourself up for a healthy retirement.
Our experienced financial planners are here to help you through every step of the planning process and will take a detailed look at your entire financial picture so we can assist you in coming up with a plan to reach your retirement goals. Visit our home page to learn how you can book a free two-hour consult with one of our planners today.