Counting down to retirement…

Seven considerations before you say goodbye to work for good

Are you thinking about retirement? If you are, here are seven tips to consider before you say goodbye to work for good. According to the latest data available from the Australian Bureau of Statistics (ABS), there were more than 3.9 million retirees in Australia in 2019. It’s a figure that continues to grow, with the ABS reporting that approximately half a million more people were intending to join them over the subsequent five years.

That’s a lot of people counting down the days before they stop working, but how many of them will be ready for what’s ahead? Retirement is about enjoying life to the fullest after years of working hard. Here are seven tips to consider to help you prepare for a successful life after work.

1. Make a plan

It’s a good idea to know what you want to do ahead of time. According to the latest data from the ABS, the average retirement age is 55 and the average life expectancy is around 81 for men and 85 for women. This means you’ll likely have decades of free time ahead of you.

The world really is your oyster, so thinking ahead about what type of lifestyle you want to lead in retirement will guide your plan. It’s worth considering:

Your social life and recreational activities;
How you’ll stay active and healthy;
Different retirement living options, including downsizing or moving to a new location, and;
Whether you want to help your kids and grandkids – either financially or by being there to help with day-to-day care.

2. Pick a date

Several factors will likely influence when you retire. According to the Australian Bureau of Statistics, 46% of retirees cited financial security as their main reason for retiring. This was followed by 21% who said physical health was the catalyst, and 11% who were retrenched, dismissed or unable to find work.

That considered, the best guide for when you should retire will depend on:

when you can access your super, also known as your preservation age (see point 3);
your finances (see point 3);
your health (see point 5);
your employment opportunities; and
your (and your partner’s) individual preferences.

3. Review your finances

Your financial situation will guide what sort of retirement you’ll be able to afford. The Association of Superannuation Funds Australia estimates that – assuming a retiree qualifies for a partial age pension – a couple needs at least $640,000 at retirement to support a comfortable lifestyle, while a single person needs $545,000. A good place to start understanding how much retirement money you need is the retirement planner on Moneysmart.

As you edge towards retirement age, it is important to take a closer look at your financial situation and map it out for the future. If you have a partner, you’ll also want to jointly discuss expectations and future plans. Reviewing such things as what you presently have accumulated in assets and savings, what your superannuation and savings balances will look like at retirement and whether accessing an age pension will be available to you. The ability to pay-down any debt prior to retirement will also impact your net retirement income.

You’ll also need to factor in what age you can access your superannuation and how long your money will last for, as you may live longer than your current life expectancy.

Barring exceptional circumstances, most people will have a superannuation preservation age of between 55 and 60, depending on when they were born. If you’re not quite ready to stop working altogether, one of the options to examine once you reach preservation age may be a transition to retirement strategy, allowing you to access some of your super while you still work, while also continuing to contribute to your super balance. Depending on your circumstances, this can be a tax-effective strategy for easing your way out of the workforce and may be worth discussing with your financial adviser.

4. Set a budget

Before you retire, you’ll need to make some big decisions. These might include how you’ll manage any income you’re earning and the coverage you have in your health and the life insurance policies. You can work out your retirement budget by:

Evaluating your expenses and financial needs;
Calculating your monthly income (from the government and your own investments); and
Determining if your income now will be sufficient to retire in the future.

If your finances are too complicated to sort out on your own or it all feels overwhelming, you may want to seek professional advice. A financial planner can help determine where you need to adjust your plan and prioritise what is most important to you.

5. Set up a will and power of attorney

Unfortunately, it’s a fact of life that none of us are going to live forever. This means you’ll need to have a plan for what happens to any assets you leave behind. This is where setting up a will and a power of attorney comes in.

Your will is a legal document stating what you want to happen to your assets when you die. This covers things like:

How you want to share your assets;
Who will look after your kids if they’re still young;
Setting up trusts for your kids and grandkids;
How much money you’d like to donate to charities; and
Plans for your funeral.

Having a current will in place can help you make sure your money goes where you want it to – and can help prevent your surviving family from conflict over your estate.

It’s also worth considering setting up a power of attorney, which gives a nominated person the legal right to look after your affairs for you. It’s important to nominate someone who is trustworthy, financially responsible and likely to be around when you need them. A solicitor or your state office of the Public Trustee can provide more information and/or advice on your estate needs.

6. Consider your physical health

For most of us, our physical capabilities won’t be the same in our 60s and 70s as they were in our 20s and 30s. But this doesn’t mean you can’t remain physically active or try new things.

In fact, you might find you’ll have more time than ever to really take care of your body in retirement. This is encouraging, as your physical health also affects your mental wellbeing. Exercising, eating a balanced diet, getting enough sleep and drinking water all lead to good physical and mental health.

On the other hand, you should also prepare for if you (or your partner) get sick. This might mean having aged care facilities or a hospital near your home, or perhaps living closer to your kids or other family members for extra support.

7. Emotionally prepare yourself

Last but certainly not least, you’ll want to make sure you’re mentally prepared for retirement. Much is said about the freedom you’ll have when you retire. However, we tend to ignore some of the negative emotions that come with it – such as loneliness and isolation, or a loss of identity and purpose.

Beyond Blue estimates that around 10 to 15% of older Australians experience depression, while 10% experience anxiety. The rate of depression climbs to 35% for people living in residential aged care facilities.

Fortunately, there are strategies you can use to help overcome negative feelings and maintain good mental wellbeing in retirement. Connecting with your family and friends more often, looking after your physical health, prioritising your personal safety, and accessing support when you need it, are all important measures to help you during the transition to retirement.