Table of Contents

The Retirement Planning Checklist

Imagine a world where we can finally quit working — where we don’t have to go to work every day but still get paid and have time to do all the things we never have time for. The opportunity to travel for longer periods of time without having to rush back to work, to pursue hobbies, to experience a sea or tree change, or to spend time with the grandchildren. Sounds like a dream, doesn’t it? This might be your future reality, and all it takes is a well-thought-out retirement planning strategy tailored to your specific requirements.

Some people enjoy their jobs and wish to continue contributing for as long as they can, even if it means working part-time into their late 60s and 70s. Others simply avoid thinking about retirement because they are too busy, find the topic boring, or are concerned that they will not have enough savings to live comfortably.

Whether you’re apprehensive or not, the sooner you start the retirement planning, the higher your chances of making the most of your golden years. In reality, many of us may spend almost as much time in retirement as we did working, and that will only be possible when we do the retirement planning carefully.

The retirement planning may not be the most interesting aspect of financial planning. It is, nevertheless, undoubtedly one of the most important. The retirement planning is a multi-step, time-consuming process. It all starts with considering your retirement objectives and how much time you have to achieve them. Then you must consider the various types of retirement accounts that can assist you in raising the funds necessary to fund your future. You must invest the money you save in order for it to grow.

It’s easy to put off thinking about retirement when attaining the appropriate age seems like a long way off, but with each passing year, it becomes more and more of a reality.

If thinking about the next phase of your life makes you worried or uncomfortable, we want you to know that you don’t have to feel that way. Following this retirement planning checklist will give you peace of mind.

This step-by-step approach to the retirement planning is the first and most important step toward creating a strategy that ensures you’ll never have to worry about it again. Working through these five simple steps in will get you started.

1. Identify your retirement lifestyle

What do you want to do with your retirement years? Consider the retirement planning particularly how you want to spend your retirement, where you want to live, and what kind of home you prefer. Perhaps you’d like to spend your annual vacation overseas while you’re still physically active, or you’d like to buy a van and travel Australia. Do you prefer to eat out frequently, play golf, and maintain an active social life, or do you prefer to stay at home and garden, craft, or tinker in the shed?

Consider the cost of creature comforts like the capacity to upgrade cars, laptops, and cellphones; the ability to buy nice clothes; drink fine wine; and pay for private health insurance. You might also want to help the kids financially or with the grandkids’ education costs.

If you’re married or have a partner, tell them what you’re thinking. It’s best to find out now, while you still have time to change your plans, if you have different aspirations and expectations about how you want to live in retirement.

2. Determine your retirement needs

Knowing your financial situation and the life goals you want to pursue will make the retirement planning much easier.

It will be easier to identify the required size of a retirement portfolio if you have reasonable expectations regarding post-retirement spending habits. The majority of people expect that after retirement, their annual spending will be just 70% to 80% of what it was before. As a general rule, financial planners estimate that you’ll need between two-thirds (66%) and 80% of your pre-retirement income to maintain your lifestyle. This assumption is frequently proven to be unrealistic, particularly if the mortgage has not been paid off or if unexpected medical expenses arise.

Keep track of your current costs in order to create a budget and have a crystal-clear picture of how much money you’ll need to live your dream post-work and comfortable lifestyle. Once you’ve gotten a bird’s-eye view of your current financial situation, it’s time to see where you can save money today to better your financial future. You must also consider how long your money must last in order to accomplish this. For example, rather than spending $1,500 per month on rent, you may plan to buy and pay off a home so that you won’t have to pay rent once you stop working.

On the other hand, do you need easy access to income once you’ve stopped working? You should consider investing. However, before you invest in any financial instrument, you must first determine your risk profile.

The willingness and ability to take risks is assessed by your risk profile, which is an important component of investing. This will also identify the right asset allocation for a portfolio’s investment assets. A common retirement plan investing strategy is to generate returns that cover yearly inflation-adjusted living expenses while maintaining the portfolio’s value. The portfolio is then passed on to the deceased’s beneficiaries. To identify the best solution for the individual, you should speak with a tax advisor.

Identifying your retirement demands also includes determining your retirement timeline. While it may not appear to be significant at first glance, the length of time between your current age and the age you’d like to retire might have a significant impact on how the retirement planning is organized.

For example, if you are in your mid-to-early twenties and plan to retire at the age of 60, you have around 40 years to adopt a variety of financial plans to save more for life after work over a long period of time. A longer timeframe also allows you to consider higher-risk strategies, such as investing your superannuation in a high-growth fund, because the extra time you have will allow you to better weather any financial market volatility.

If you are in your 40s or 50s and plan to retire at 60, on the other hand, you may need to be more conservative with the strategies you use to accomplish your ideal retirement. Depending on your financial situation and the difference between where you are now and where you want to be, you may even have to become more conservative with the lifestyle you want to keep after quitting work.

If you’re not sure where to begin when determining your retirement time frame, your financial advisor can assist you by helping you clarify your retirement goals and determining which path will best help you reach them.

3. Planning your Superannuation Strategy

If you’re a long time reader of Wealth Factory’s blogs or articles, you’ve definitely come across the term “superannuation” – or “super” for short – and have a basic grasp of how it works and what it has to do with retirement.

Beyond that, though, the average Australian is unlikely to be well-versed in the complexities of superannuation. It’s strange that super is often viewed as an afterthought, given how important it is to a successful retirement plan.

However, super does not have to stay a mystery. In fact, there are a variety of financial strategies that may be used to get the most out of your super and attain the post-work future you’ve always desired.

One of these ways is to voluntarily contribute to your super, which comes with several tax benefits — especially for individuals with higher-than-average incomes. Contributing to your superannuation fund on a voluntary basis is undoubtedly one of the most effective strategies to ensure you’re on track to achieving your ideal post-work lifestyle. Consider it this way: by voluntarily contributing to your super through concessional contributions and non-concessional contributions, you are effectively lowering your current tax obligations while also investing in your future by boosting your retirement income.

After all, the idea behind getting the most out of your super is simple and clear: pay less tax now while helping you live out your ideal future.

4. Understanding the factors in your retirement

While super is a key component of your retirement strategy, there are other things that can influence how you spend your time after work. These are some of them:

The Government Age Pension

Citizens aged 66 and 6 months or more are eligible for a pension from the Australian government. However, because the highest pension for a single person is $900.80 a fortnight, the pension alone is insufficient for most people to live comfortably. Your pension may also be lowered as a result of your other investments and income.

Government subsidies may lower out-of-pocket costs, but having money expands your options and gives you access to high-quality care at home or in an assisted living facility.

Creating a Retirement Safety Net

Until now, this guide has primarily focused on making the most of your superannuation to create your ideal post-work life. However, both your super and non-super income and savings have an impact on your retirement savings.

That’s why we’ll now focus on ensuring that you can maintain a pleasant lifestyle after work, even if an unexpected cost arises.

Even the finest financial plans can be foiled by life. What if you acquire a new family member or purchase a larger home or vacation home unexpectedly?

By putting together a financial safety net, you’ll be able to face anything life throws your way with the assurance that you’ll stay on pace to achieve your goals.

5. Understanding Estate Planning

Estate planning is the process of preparing duties to handle a person’s assets in the event of their disability or death. The gift of assets to heirs and the settlement of estate taxes are all part of the preparation.

Estate planning is another important part of the retirement planning, and each aspect needs the skills of different professionals in that industry, such as lawyers and accountants. Life insurance is also a crucial component of estate planning and retirement planning. Having a comprehensive estate plan and life insurance coverage ensures that your assets are transferred according to your wishes and that your loved ones are not financially disadvantaged when you pass away. A well-thought-out plan can also help you avoid the costly and time-consuming probate process.

Another important aspect of estate planning is tax planning. If a person wants to leave assets to family or a charity, the tax consequences of gifting versus passing them through the estate process must be weighed.

The Bottom Line

Action, paired with the knowledge learned from this guide, is the real technique to ensure that the retirement planning is on track to turn your dreams into reality.

As Australians are living longer, healthier lives, many of us may expect to spend nearly as much time in retirement as we did working. Striking a balance between reasonable return expectations and a desired level of living is one of the most difficult aspects of building a comprehensive retirement plan. Focus on building a flexible portfolio that can be modified on a frequent basis to reflect changing market conditions and retirement goals.

It’s generally recommended that you seek independent financial advice well before you retire, but if you go through these five steps in your retirement planning checklist first, you’ll be in a better position to acquire the help you need.