Planning ahead for the lifestyle retirement
WHEN we finally start to see our retirement on the horizon a lot goes through our minds.
We start to think about all the things we want to do but haven't yet. The adventures and places we've always wanted to explore but never had the time to. We ask ourselves big questions like: what do I want to do for the next 30 to 40 years?
Then we start to think about money. Do I have enough money to tick off all those things on my bucket list? I'm over work, but what happens when I no longer receive my fortnightly pay check? Will I/we be able to manage?
We all have different goals. And each different retirement lifestyle brings with it its own unique set of questions.
Here are some helpful pointers to help you navigate a few different types of retirement lifestyles.
Globe trotter, cruiser or adventure seeker
Firstly, you need to establish what kind of traveller you want to be. Are you a flash packer or backpacker? Are you looking to tick off as many places as you can off your list? Or, are you the kind of traveller that likes to really get a feel for the place they are visiting and stay put for a while?
Establishing the above will help you determine your budget. I encourage my clients to think about their retirement savings in buckets: the income nest egg and the lifestyle bucket list funds.
By keeping your funds separate you're less likely to eat into your income fund. Knowing exactly how much you have in your nest egg and that you have enough to cover your day to day costs will bring peace of mind. This will give you the space to enjoy whatever adventure you choose to go on.
The working retiree
Sometimes our retirement is not about stopping paid work altogether. But it's important to be very clear about why you are continuing to work.
Working in retirement because we need to rather than because we want to isn't retirement at all. We define retirement as ceasing work because you have enough money for the lifestyle you want. I tell my clients that they shouldn't rely on their part time income.
Some companies offer a Transition to Retirement approach which involves reducing your working hours over several years prior to retirement. This can valuable for both the employer (who doesn't lose valuable knowledge all at once) and the employee.
Transition to retirement is a flexible option that allows you to work longer and retire later and on your terms, and rewards you for staying in the workforce by allowing you to access some of your super to make up your income to the required amount. However, as it can be complex, we strongly suggest you discuss your options with your super fund and seek licensed financial advice.
There's a difference between transitioning to retirement and having a part time job in retirement. Be sure you know which one suits you best.
Whether you're looking for a sea or a tree change, or you just want to downsize, it pays to do the numbers. Selling the family home is not a simple or easy decision and there are many financial, practical and emotional factors to consider.
Clients will often say that they'll top up their super with the "extra money" from downsizing their home. Sadly, the new smaller home in the dream location often comes with a similar or higher price tag.
But if you're lucky enough to have money left over after you downsize you could look at using the government's downsizing contribution scheme to add the extra money to your superannuation and top up your nest egg.
The scheme is open to those who are aged 65 or over and sell their principal residence that they have owned for at least 10 years. If you tick that box, you are eligible to make a non-concessional contribution to super of up to $300,000 from the proceeds. Couples can contribute $300,000 each.
Downsizing your home may have an impact on the amount of social security you receive because your Age Pension entitlement depends on the value of your assets and the amount of income you receive.
No matter the retirement lifestyle you are hoping to achieve, planning ahead and early as possible will reap rewards.
Dianne Charman, of Jade Financial Group, is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.