It’s never too early to start planning for retirement – in fact, it’s one of the most important things you can do to achieve financial freedom in your later years. But before you start counting down the days to your golden years, there are a few things you’ll need to take into account.
How much money will you need to live comfortably? What will your expenses be like? How will you manage your money? How much income or money can sustain you throughout retirement? These are all important questions to answer before you retire. Retirement can be a time of financial independence and relaxation, but it’s important to plan ahead so you can make the most of it. On that note, here are the factors to consider when planning your retirement:
The Biggest Considerations in Retirement Planning
1. The Different Types of Risks That Can Affect Your Retirement
Several different risks can affect your retirement, and it’s important to be aware of them all before you retire. The most important thing to remember is that you should never overlook the importance of saving for retirement. It’s also crucial to have a solid plan in place in case something unexpected happens.
Some of the biggest risks that can affect your retirement age include:
The stock market can be incredibly volatile, and if you depend on your investments to fund your retirement lifestyle, a sharp decline in the market could leave you with significantly less money than you expected. Having a solid investment strategy and a well-diversified portfolio can help you identify investment assets well-suited to your risk tolerance and needs.1
Inflation can erode the value of your retirement savings over time, making it challenging to maintain your standard of living in retirement. Consider your financial goals and determine how inflation will affect your personal circumstances.
Health care costs can be prohibitively expensive, especially as you get older, and they can quickly eat into your retirement income or savings if you’re not prepared for them. A thorough retirement plan is essential to help you understand the upcoming healthcare costs involved.
Long-term Care Expenses
Many people underestimate the cost of long-term care, which can add up quickly if you need extended nursing home or home health care services. Planning well before your retirement age makes sense to figure out the long-term care expenses once you retire. If not, you might encounter problems and mistakes that could have been avoided.
2. Being Aware of Your Spending Patterns and Retirement Income
If you’re used to spending a lot of money, you may need to adjust your budget when you retire. This includes being aware of your current spending and what expenses will be eliminated or reduced in retirement. For example, if you’re no longer working, you’ll no longer have commuting costs or work-related expenses. You’re also likely to have less income, so it’s important to plan ahead and create a budget that fits your new lifestyle.
3. Staying on Top of the Changing Tax Rates
As you approach retirement, staying on top of the ever-changing tax rates is important more than ever. The tax brackets are updated yearly, and they can change significantly from one year to the next. If you’re not careful, you could end up paying more taxes than you expected in retirement.
To stay ahead of the curve, make sure to set up a comprehensive retirement plan, that takes your super fund into account. This includes recalculating your expected income and adjusting your withdrawals accordingly. You should also keep an eye on any legislative changes that could affect your taxes in retirement. Working with a retirement planner can set you up for a comfortable lifestyle without having to worry about the transition.
The Bottom Line: The Importance of Preparing in Advance for a Comfortable Retirement Plan
No one knows for sure when they will retire, but it’s important to be prepared for it nonetheless. Retirement planning isn’t something that can be done overnight; it takes time and effort to save up enough money to cover your costs once you’re no longer working. However, if you start planning early and make a concerted effort to save, you can ensure a comfortable retirement lifestyle.
How Can We Help You?
If you’re looking to start your financial journey towards retirement, it’s better to work with an experienced financial adviser rather than try to do it yourself.
Central Coast Financial Planning Group is a team of financial experts who assist clients in managing their investment goals and guiding them in creating sound financial decisions. From superannuation advice to the retirement planning process, through to aged care and estate planning advice—we’ve got you covered.
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.