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October 4, 2023

6 Tips To Start Retirement Planning Strategies in Australia

Tips To Start Retirement Planning

A lot of people are interested in learning about retirement planning. They desire a good start and the assurance that their golden years will be comfortable. If you’re in the same situation, planning your retirement from now on can be very helpful.

Why should you consider retirement planning? Planning for retirement is crucial for ensuring your financial stability. With your plan’s assistance, you can determine your risk tolerance, required investment return, and portfolio withdrawal strategy.

Tips To Start Retirement Planning

In this article, we will provide a systematic guide to help you proactively plan for a financially secure retirement, ensuring that you do not face financial challenges in your post-retirement years.

1. Know The Age You Can Access Your Super

Two crucial figures you should be aware of are your Preservation Age and your Qualifying Age. It’s essential to understand the significant distinction between these two.

  • Your Preservation Age: This is the minimum age you must reach before you can access your super. The age varies depending on the year of your birth. To access your super, you must meet certain criteria. These criteria include reaching your Preservation Age and either retiring, stopping work at 60 or older, or reaching 65.
    Use the following table to find your Preservation Age:

Birth YearAge You Can Access Your Super
Before 1 July 196055
1 July 1960 to 30 June 196156
1 July 1961 to 30 June 196257
1 July 1962 to 30 June 196358
1 July 1963 to 30 June 196459
1 July 1964 or After60
 
  • Your Qualifying Age: This determines when you can apply for the Government Age Pension. Your Qualifying Age is higher than your Preservation Age. This is because even if you can access your super, you might not be old enough for the Age Pension. There are multiple qualification criteria you must fulfil, such as regulations on residency and evaluations of income and assets.
    Use the following table to find your Qualifying Age:

Birth YearAge You May Qualify For The Pension
From July 1952 to 31 December 195365 years 6 months
From January 1954 to 30 June 195566 years
From 1 July 1955 to 31 December 195666 years 6 months
On, or After 1 January 195767 years

2. Know When You Want To Retire


Deciding when you intend to retire is a significant choice on your financial path. It requires defining precise retirement objectives and creating a schedule for your retirement strategies.

The timing of retirement can fluctuate considerably from one individual to another, and it is impacted by various factors, including your financial preparedness, personal ambitions, and life circumstances. Elements such as your job prospects, your physical well-being, and your family circumstances, could also affect your choice.

When deciding when to retire, there are factors to think about, but no strict guidelines. Here’s a checklist to help:

  • What you want in retirement
  • How much might be enough for a modest or comfortable retirement
  • How long might you spend in retirement
  • What sources of income you may have access to
  • How long will you maintain your health

3. Calculate Your Living Cost


How much money you’ll need for living costs in retirement depends on your lifestyle priorities and what you can afford.

Your retirement income will come from superannuation. If you have little super, you will rely more on the pension. If you have super, consider when and how to withdraw it. You may also have savings or investments.

Work out your living costs
Consider:

  • Housing — rent or mortgage, rates, home and contents insurance, maintenance
  • Utilities — electricity, gas, water, phone, internet, streaming services
  • Food — fresh food, groceries, takeaway, dining out
  • Clothing and Household Goods — clothing, personal care, furniture, household appliances
  • Health and Leisure — health insurance, health care, social activities, fitness, holidays, gifts
  • Transport — car registration, insurance and running costs, public transport

As a general guideline, consider budgeting for about two-thirds of your present living expenses. This benchmark is helpful because it considers lower work costs and assumes you have finished paying your mortgage.

4. Choose Your Lifestyle and Priority


Decide what matters most. Consider how your lifestyle will feel and appear. What are the most important things?

Think about your living expenses, for example:

  • Your living costs
  • Social life and recreation
  • Staying active and healthy
  • Volunteering or community participation
  • Planning for changing health needs or aged care
  • Supporting your family, children or grandchildren (if any)

Make plans for where you will live. For example, if you own your home:

  • You could spend some of your super (when available) to pay off your mortgage if haven’t paid it off.
  • To save money, take into account downsizing. You might relocate to be nearer to family or services, pay off your mortgage, or maintain your lifestyle. Check the tax implications and whether it would influence your government benefits before proceeding.

Should you be renting:

  • If you rent a place and receive Centrelink benefits, such as the Age Pension, you can be qualified for an additional payment. Visit the Services Australia website’s page on rent assistance for additional information.
Tips To Start Retirement Planning

5. Know Your Retirement Income Options


Three primary sources of possible retirement income include your super, the Government Age Pension, and any assets you possess.

Super

Even when you reach your preservation age, you can keep your super working for you. Depending on your circumstances, whether you want to retire or keep working, there are options to consider.

Account-based pension – paying yourself from your super. Did you know you don’t need to take all your super out at once? The option of an account based pension allows you to draw a regular income from your super while it continues to stay invested. You can also access extra money whenever you need it.

Government Age Pension

As of March 26, 2021, around 62% of Australians aged 65 and above receive some form of Government Age Pension. The Age Pension is a payment you can get every two weeks after you retire, if you qualify. It can give you extra money.

To get the Age Pension, you need to meet age and residency rules and pass tests for income and assets. If you’re eligible, your Age Pension payments can supplement your income payments from your super.

Assets

You can also compose your retirement income from personal savings and assets like real estate and stocks. It’s beneficial to comprehend the function your assets serve in your retirement strategy. For example, one option available to Australian homeowners is downsizing. If your retirement home is too large, you can sell it and put the money into your super.

6. Plan Your Future


Here’s a list of things that you can do for planning your future retirement!

Save For An Emergency

Creating a backup fund is important for financial stability. This fund provides money for unexpected expenses like repairs, emergencies, or bills. It helps people prepare for unexpected situations and reduces worry about money.

A contingency fund serves the primary purpose of providing readily available cash that you can access immediately when needed. You should keep the fund separate from regular savings or investment accounts. This will allow for easy access without penalties or restrictions.

Make An Estate Plan

When considering the future, it is crucial to contemplate the arrangements for your belongings after your death. Thinking about how you would like to handle and care for your possessions is important. To ensure that you carry out your wishes effectively, you need to make important decisions and take necessary steps.

  • Creating a will ensures that you distribute your assets according to your wishes after your death.
  • Having powers of attorney in place is important in addition to a will. They grant someone the authority to make decisions on your behalf if you become incapacitated.
  • Choose a beneficiary for your superannuation to make sure your savings go to the person you want when you die.

Having a will, powers of attorney, and a designated beneficiary for your superannuation is important for estate planning and ensuring your wishes are respected after death.

Securing a comfortable and worry-free retirement is a goal we all aspire to achieve. By considering these six key steps to set the foundation for a secure retirement, you are taking a proactive approach to your financial future. Remember, it’s never too early to start planning, and with careful consideration, disciplined saving, and informed decision-making, you can build a solid financial foundation that will support you throughout your retirement years.

Read more: Top 5 Biggest Retirement Planning Mistakes

Are you new to retirement planning and looking for ways to secure your financial future? If you’re not familiar with the concept of a Self Managed Super Fund (SMSF), you might be missing out on the benefits of a SMSF for managing your retirement savings. Explore the advantages of a SMSF to see how it can benefit your retirement strategy.

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