From Herald Sun – 26/03/12

Seven things to ask before retirement

Deciding when to retire can be one of the scariest decisions you will make. Get the timing wrong and it can affect the way you live for decades. It used to be simple. Most would aim for 55, 60 or 65 years of age, and their superannuation would give them some money in retirement which could be topped up by a generous age pension.

Those were the days. Today the age pension has been watered down and superannuation-guarantee contributions are not enough on their own to fund a decent retirement.

Over the next 10 years, 1.4 million Australians will be faced with that critical ‘when to retire’ decision. But you can reduce the risks of pulling the retirement trigger by asking yourself these seven important questions.

What sort of lifestyle do I want?

Retirement should be one of the happiest times of your life. Sit down and cost a decent retirement lifestyle. Include expenses that make you happy: the golf membership, a dinner out every week or so, regular holidays. Life is for living, so be realistic or you’ll be miserable and grumpy during retirement.

The result will look a bit scary.

How long do I intend to live for?

You don’t need to play God, but looking at your genes can help. If you come from a long line of stayers, then you are more likely to follow suit. But be conservative in the longevity guess. It is better to go early with a bit of spare cash left over for a surviving partner or your children than it is to run out.

Will I be debt-free?

In past generations, people were generally debt-free when they retired, so loan repayments didn’t really come in to the financial equation. Today it’s a lot different; with a recent survey showing almost 50 per cent of all retirees will not have paid off their home by the time they retire.

Loan repayments are a crucial element when calculating a retirement budget – not only home loans but also credit cards.

Do I intend leaving anything for the kids?

Some people still aim to leave money for their children. Frankly, we reckon adult children should be big enough to look after themselves. However, everyone’s different and there could be some good reasons for leaving money. Just make sure you plan and budget for it when making that retirement decision.

Can I earn other income in retirement?

Earning extra cash during retirement can make a huge difference to lifestyle, not only from a financial point of view but also in terms of keeping physically and mentally active.

How much will I need to have in super?

Now that you’ve looked at retirement expenses, income sources and lifestyle considerations, it’s time to crunch the numbers. Go to your bank’s website and in the superannuation section there will be a calculator to do all the sums.

A general rule for retiring at age 60 is that super of $436,000 will generate income of $25,000 a year for the average lifespan. Allow a bit more for women because they live longer. To generate $45,000 a year you will need a retirement balance of $788,000.

Will I need to, and can I, change my strategy?

Now that you have the facts, sit down with us to assess super contributions levels, and revise retirement dates and investment strategies to achieve that target superannuation payout.

Key Steps

• Don’t panic
• Seek advice
• Pay off debt
• Decide where you want to live
• Get a health check
• Make some important lifestyle decisions
• Discuss with your partner.

The important thing to consider is how is your superannuation performing? How much will you have in superannuation? Will it be enough for you & your family? The answer to these questions and many more can be difficult to find answers for – you need to speak to us immediately to see how we can help. Remember, “The earlier you plan, the greater chance you have of achieving your goals and objectives”.