Retirement is your time to enjoy life to its fullest and tick items off your bucket list. However, without good foundations in place, that dream voyage could become an unpleasant slog up a proverbial creek.
Having worked hard all your life, the last thing you want – or deserve – is to board the retirement ship only to discover it’s riddled with worrisome leaks, unfavourable cargo or is sailing in the opposite direction from your dream destination.
Don’t leave your golden years to chance. Before calling time on your working life, use this simple checklist to lay the foundations for a happy and prosperous retirement journey.
- Tax planning
Paying too much tax is generally an avoidable mistake with some diligent preparation.
Consider, for instance, the different tax rates applied to investments you own personally versus those owned by your superannuation, company or family trust. Optimise ownership to minimise tax.
Selling investments to top up your super may attract capital gains tax (CGT). Or conversely, you could enjoy certain benefits for making additional contributions now.
Then there are your beneficiaries – you could unwittingly leave your family worse off if your will is incomplete or poorly structured, or assets are distributed unwisely.
- Appropriate structures
Retirement opportunities to stretch your money further will depend on structure and age.
For example, superannuation versus pensions – you may even be eligible for a part-pension, helping to conserve your super. Your spouse or partner may qualify for Centrelink benefits even if you don’t (or vice versa).
Even home ownership should be scrutinised. If you don’t own your own home, can you get into the market while still in paid work? Can your current home accommodate your needs as you get older? Will downsizing allow you to unlock additional funds? Is an expensive relocation on the cards and, if so, has it been budgeted for? Are you and your partner joint tenants or tenants in common?
- Adequate protections
Without employment to generate income once you’re retired, super and investments are your means of keeping food on the table. Hence protecting them is paramount.
Review insurances. Some cover – life, total permanent disability, private health – becomes even more important with age, yet harder to obtain. Others, including professional indemnity, may no longer be needed.
Revisit asset protections to maintain sufficient coverage – both for repairs/replacement and associated losses. Does your home insurance offer temporary accommodation should your home be damaged? Rental car cover should your vehicle be stolen? Can you meet upkeep costs on an investment property if it is untenanted?
Devise backup plans. How will you respond if markets fall, wiping out super or other investments? How is your money invested to cater for access whilst still allowing growth and income?
What is your emergency fund like? If those funds are depleted, replenish them while you are still working.
- Expense forecasts
Consider how you will be spending your days in retirement, because your new-found freedom and what you do with it will directly impact your spending habits.
Sure, you may save on commuting to the office or having work clothes dry-cleaned.
Conversely, though, more time at home will mean higher energy costs and no more work-funded meals.
Plus, you may want to travel, start new hobbies or get more active in existing ones, all of which will have additional costs. Spoiling your grandkids doesn’t necessarily come cheap. Even volunteering your time and skills to worthy causes may hit your hip pocket (such as non-refundable travel and administration).
- A co-ordinated plan
A well-considered and co-ordinated savings and investment plan is ultimately the key to smooth sailing in retirement (as for any stage of life).
Ensure that your left hand and right hand are talking to each other – that is, you know how your various income sources and protections (super, will, company, trusts, savings, investments, insurances, tax, etc.) align with one another.
Factor in your partner too – will they still be working once you retire? Do you both have enough super to contribute effectively? What is and is not in joint names – and should it be?
Having an adviser to assist you is fundamental to enjoy smooth sailing in retirement. With their help, you can avoid mistakes, embrace strategies and investments you weren’t aware of, manage your legacy effectively and even navigate emotions during one of life’s biggest transition periods.
Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1 per cent of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at www.onyourowntwofeet.com.au
