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Looking forward to an enjoyable retirement?
Learn how to prepare with our top ten tips on retirement planning.
Retirement planning is about more than building a superannuation balance. A successful retirement plan considers your lifestyle goals, retirement income needs, investment strategy, tax position, estate planning requirements and potential access to government benefits. Whether retirement is a few years away or several decades into the future, starting early can help you build greater financial security and flexibility.
The following retirement planning tips can help you prepare for a comfortable and financially secure retirement.
Tip one: Define your retirement lifestyle goals
Picture your ideal retirement
Retirement looks different for everyone. Before focusing on financial projections, consider what you want your retirement to look like.
Questions to ask:
- How do you want to live in retirement?
- What hobbies or activities do you want to pursue?
- What travel plans do you have?
- What level of income will support your desired lifestyle?
- Will your current superannuation and investments be sufficient?
Establishing clear goals helps create a roadmap for your retirement planning strategy.
Tip two: Create a sustainable retirement income plan
Map out the income you’ll draw from investments, superannuation, and aged pension
Australians are living longer than ever, meaning retirement savings may need to last 20 to 30 years or more.
Therefore, it is essential to structure your investments appropriately to ensure your assets last throughout your retirement, while also factoring in the impact of inflation. As you get older, the likelihood of higher medical expenses and needing extra assistance increases. Make sure to plan for these potential expenses to safeguard your financial wellbeing in later years.
A well-structured retirement income plan should consider:
- Superannuation income streams
- Investment income
- Age Pension eligibility
- Inflation
- Healthcare and aged care costs
Planning ahead can help ensure your retirement savings continue supporting your lifestyle throughout retirement.
Tip three: Review your investment strategy before retirement
Adapt your investment strategy for retirement
In the years leading up to your retirement, you will want to focus on capital growth to ensure your investments are building wealth. Although this is still important in the retirement phase, your priorities shift. Generating a reliable income becomes essential as you begin drawing down your investments to cover everyday expenses.
This means you will likely need to diversify your investments to help reduce your risk and achieve smoother, more consistent returns throughout retirement. Make sure to review your overall investment strategy in the lead up to retirement to ensure it aligns with your financial goals and supports your desired lifestyle.
Tip four: Understand your retirement risk profile
Planning your retirement investments and sticking to your investment plan
Investment markets can fluctuate significantly, particularly over shorter periods.
The value of your investments can change quickly. As retirement approaches, it's important to understand how much investment risk you are comfortable taking and whether your portfolio remains appropriate for your circumstances.
You will need to weigh this up against the returns you need to achieve your desired retirement income and develop an investment plan that supports your goal. Developing an investment plan and maintaining discipline during market volatility can help support better long-term outcomes.
Avoid panic selling during market downturns, as this often results in poor outcomes. It is better to stick to the plan as much as possible to achieve the best long-term results.
Tip five: Optimise tax outcomes in retirement
Get your tax structure right
The structure you use to hold your investments can have a significant impact on your retirement outcomes.
Beyond selecting your underlying investments, it’s equally important to ensure they are held within the right structure. This can help reduce tax liabilities and may even increase your Centrelink benefits.
Investing your retirement savings in structures such as superannuation can can have a significant impact on your tax liabilities, and those savings definitely add up over time. Superannuation remains one of the most tax-effective investment structures available to Australians. Reviewing your retirement tax strategy may help reduce tax liabilities and improve overall retirement income.
Tip six: Review your estate planning documents
Secure your retirement savings for future beneficiaries
Although our lifespans are increasing, none of us will live forever. Dying without a will may not be a problem for you, but it could create significant difficulties for your children. Thoughtful estate planning ensures your assets are transferred to the intended recipients at an appropriate time.
Make sure you have a will in place. You should also speak with your solicitor about an Enduring Power of Attorney and medical care directive. These can help your family fulfil your wishes if you’re not able to make decisions yourself. Remember to review your estate plan at least every three years to keep it up to date.
A comprehensive estate plan should include:
- A valid will
- Enduring powers of attorney
- Medical or advance care directives
- Updated superannuation beneficiary nominations
Regular reviews can help ensure your wishes are carried out and reduce unnecessary complications for your family.
Tip seven: Maintain your health and wellbeing in retirement
Stay mentally and physically active
Financial security is only one part of a successful retirement. If you stay mentally and physically active, you’re far more likely to enjoy a longer and healthier retirement. Regular exercise, whether it’s walking, swimming, or joining a local fitness class, helps to maintain strength, mobility, and overall wellbeing.
Staying engaged mentally is equally important: consider taking up a new hobby, learning a language, or enrolling in a course to keep your mind sharp.
Working part-time or volunteering within your community is also a great way to maintain a sense of purpose while fostering social connections, which can combat loneliness and improve your quality of life.
Tip eight: Consider downsizing
Consider downsizing to boost retirement savings
Is a sea change beckoning? It can be a big decision to move from the home you’ve spent so many years in.
For some Australians, downsizing may provide both lifestyle and financial benefits.
Moving to a smaller property can reduce maintenance responsibilities and potentially release capital that can be invested to support retirement income needs. A downsizing strategy should be considered alongside tax, superannuation and Age Pension implications.
If your new property is at a lower cost, it can also give you additional cash which can be invested to help boost your income and support your day-to-day financial needs. This additional financial flexibility can make it easier to pursue hobbies, travel, or simply improve your overall quality of life during retirement.
Tip nine: Plan for the unexpected
Protect yourself against unexpected events
Unexpected health issues, market downturns or family circumstances - life is full of events you didn’t anticipate or plan for. The last thing you need is for your finances (and retirement) to be affected if the unexpected happens to you.
Reviewing your insurance arrangements, emergency savings and travel protection requirements can help provide peace of mind and financial security throughout retirement.
Don’t forget health and travel protection, especially if you plan to join the grey nomads.
Tip ten: Seek professional retirement advice
Seek financial advice to make the most of your superannuation and retirement savings
Retirement planning often involves complex decisions around superannuation, investments, taxation, Centrelink and estate planning. Making financial decisions can be complex and there are many unknowns.
Seeking professional financial advice can help you understand your options, identify opportunities and develop a personalised retirement strategy aligned with your goals.
The earlier you begin planning, the more options you may have available.
For more help, contact your local RSM office and talk to an adviser today.
Frequently asked questions about retirement planning
Ideally, retirement planning should begin as early as possible. However, even if retirement is only a few years away, there are often opportunities to improve your financial position and retirement outcomes.
The answer depends on your lifestyle goals, retirement age, expected expenses and income sources. A retirement plan can help determine how much capital you'll need to support your desired lifestyle. Read more: Retirement - How much do I need?
Many Australians review their asset allocation as they approach retirement to balance growth opportunities with capital preservation and income generation.
Eligibility depends on your age, assets and income. Many retirees qualify for a full or part Age Pension, making it an important consideration when planning retirement income. Learn more about planning for retirement >
Professional advice can help you navigate complex decisions involving superannuation, investments, taxation and retirement income strategies, helping you make more informed decisions.
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