Are you ready to retire?

Wanting to retire is different from actually being able to retire. Many people tend to have a set age in mind they want to retire at, but is that right for you?

It's not just about being mentally ready to finish work or knowing what you will fill your time with. But have you considered your financial position and how you will fund your lifestyle once you stop earning a salary?

When planning for your retirement financially it's important to consider:

◆ Superannuation

◆ Your home

◆ Debts

◆ Additional expenses

◆ Future health needs

Superannuation

The preservation age in Australia for retiring, which is when you can start accessing your superannuation, is between 55 - 60, but you need to be at least 65 before you can receive the age pension. So you need to look at whether this fits with your current wealth.

You need enough money not just to afford your bills, but also to fund the lifestyle you want to lead in retirement.

The Association of Superannuation Funds of Australia (ASFA) developed Retirement Standard benchmarks to help people gauge how much they may need a year to live modestly or comfortably in retirement.

For instance, based on current rates, to live a comfortable lifestyle as a single person, you would need $48,266 a year, or $68,014 as a couple.

Or to live modestly, a single person would need $30,582 a year, and a couple would require $44,034 a year.

The benchmarks also include a standard of $545,000 in savings for a single person retiring at 67 years of age, or $640,000 for a couple retiring at the same age.

These numbers are also based on the idea that you already own your home, have no mortgage, and are in good health, so they won’t work for everyone.

Consider your lifestyle, and expectations for retirement and balance the reality of your financial situation.

Home now and into the future

A big part of both your financial situation and your lifestyle is your home, so considering what your housing situation will look like for the first decade or so into retirement is important.

Do you own your home already or plan to finish paying off a mortgage before retiring? Is your house bigger than what you need and will you look to downsize or move into a retirement village?

Looking ahead, to what your home might look like if you become more frail or have impacted mobility, is also important. Do you see yourself living in the community with home care if you need it, or would you rather move into an aged care facility?

These are big decisions that you should think about now, so you’re not forced to decide in an emergency situation when you are stressed.

Debts and expenses

Many Australians are racking up debts that take decades to pay off, and impact their financial situation well past the earliest retirement age. This debt can include:

◆ Mortgages

◆ Credit card repayments or loans

◆ Car loans

◆ Student loan debt

◆ Payday loans or afterpay you may have accrued

If you don’t pay these debts off before you retire, you will end up cutting into your superannuation and reducing how long you can live on your super.

While you may have a good idea of the day-to-day expenses you will have during retirement, there could be bigger once-off purchases that you will also want to consider in your retirement planning.

There are some common big ticket items that people buy in retirement to enjoy their time, for example:

◆ A new car

◆ Caravan or a boat

◆ An overseas trip or several smaller holidays each year

◆ Items for new hobbies or interests

◆ Deciding to go back to university or undertake an education course

◆ Upgrading your home

◆ New technology such as a replacement TV, tablet or smartphone

◆ Buying a new home or moving into a retirement village

A financial advisor can help you work through these expenses and determine whether it is better for you to make the purchases before you retire, so you will not be drawing on your superannuation, or whether it is better to wait a while.

Future health needs

As you get older the chance of developing serious health conditions, such as diabetes or a heart condition, increases. While Government-funded health care will contribute to the cost of managing health conditions you might develop, you will still need to pay for some aspects yourself, such as medications, elective surgeries and specialist appointments.

Having money set aside for these purposes will ensure you don’t have to compromise on your health.

Alongside potential health conditions, your overall mobility and energy may decrease over time and lead to you needing some care to stay living independently in your home.

If you have the ability to pay for a portion of your care you will be expected to, so understanding this potential future cost and how it factors into your retirement planning will mean you are less stressed when you look into accessing care in the future.

Questions to ask yourself before retiring:

 Am I in debt still or do I have a mortgage? If so, is it a lot?

 What lifestyle do I want to live in retirement and can I afford that?

 Do I have enough savings and how long will my savings last before I need my super?

 How should I access my super when I get to that point?

 Will I need the Age Pension?

 What large expenses do I want to make in retirement?

 Where am I planning to live? Am I going to move or sell my home?

 Is aged care services considered in my financial retirement plan?

 Have I talked to a financial planner to assist me with my retirement plan?

There is a lot to consider and it can be confusing to fully understand your own finances or strategies that help boost your funding for retirement. Asking lots of questions of your financial planner and understanding the answers can go a long way to being well prepared when entering your retirement years.