Australians are living longer than ever. And, according to MoneyMag’s Rodney Horin, we’re also retiring earlier. The latter statement appears to be slightly at odds with the Australian Bureau of Statistics figures released earlier this year. These showed a slight 12-month increase in retirement age last year and a gradual upward trend.
Regardless, our average retirement age and the fact we’re all living longer points towards longer retirements. One would imagine that’s a good thing, and for most Australians it probably is. A happy, healthy few decades free of work commitments is certainly an enticing prospect.
However, achieving a picture perfect retirement for the full period is heavily dependent on one thing: financial means. And herein lies a problem, Mr Horin believes. “Most Australians are severely underfunded when it comes to retirement,” he wrote recently. The widening gap between our age of retirement and our age of death has created “funding headaches for hundreds of thousands of Australians”.
Although Mr Horin’s comments may be perceived by some as somewhat alarmist, they can act as a useful reminder. For those of us who are heading for retirement but not there yet, a retirement readiness ‘health check’ isn’t a bad idea.
A 10-point retirement checklist
Figures provided by Mr Horin show that the average superannuation balance for Australian males when they retire is $436,000. For women it is significantly lower: $382,000. As he points out: “Invested at 5 per cent, these two figures yield only $21,800 and $19,100 a year.” That’s fairly obviously an inadequate yearly income for even the most frugal of people, said Mr Horin.
Again data from other sources might show variations on these numbers, but Mr Horin’s suggestion of a pre-retirement ‘to-do’ list is sensible in any case. With that in mind he has created a list of 10 things you should do before retirement. Mr Horin explains them in more detail, but in a nutshell, they are:
- Clear all debt and pay off the mortgage.
- Know how long your savings will last.
- Lower your cost of living.
- Get on top of your estate planning.
- Keep your advisers [legal and financial] close.
- Maximise the value of the family home.
- Get legal advice before committing to retirement.
- Know your aged care choices.
- Simplify your family/corporate structures.
- Beware of the next generations.
Boring but beneficial
Depending on how far away your retirement is, that checklist might seem a little over the top. It’s certainly not what most people would describe as fun, and some of the items may not even be relevant to your circumstances.
Those who prefer spontaneity in life might be tempted to ignore the list altogether. But the irony is that if their retirement years are underfunded, then opportunities for spontaneity will be very limited.
Whatever your circumstances, Mr Horin’s ‘10 things’ list serves as a useful prompt. Take the time to peruse it and apply the advice if and where it’s applicable. That will give you a better chance of a comfortable retirement, whether it’s longer or shorter than the Australian average.
Will you be retiring in the next 10 years? Do you think you’ve made appropriate preparations? Let us know via the comments section below.
Also read: Is comfortable retirement now just a pipe dream?
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