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Financial adviser’s rules to maximise the quality of your retirement

Successfully retiring demands advanced planning to ensure your financial needs are met and that your lifestyle lives up to your expectations. Financial adviser Helen Baker explains the process for the highest quality of retirement.

Retirement Planning

Retirement isn’t something you should do on a whim. Advanced planning is needed to ensure your financial needs are met and that your lifestyle lives up to your expectations.

To determine how to achieve your ideal retirement lifestyle, you must first consider the five Ws: why, who, what, where and when.

Only once you have these covered off can you really determine how to go about achieving it. Thinking about kicking back and seeing off your senior years in style? Listen carefully.

Why are you retiring?

This may seem self-explanatory but ask yourself why you want to retire. For instance, yearning for early retirement may indicate boredom or frustration with your current role, rather than working life in general. Would you be happy to continue working in a different role?

Or you may want to spend more time with family, but is retirement the only way you can achieve this? Can you dial down your hours?

Figure out whether retirement really is what you want in the short to medium term or if it’s simply a means of running away from an aspect of working life you don’t enjoy.

Who does my decision affect?

Yes, this is your retirement. But retiring doesn’t just affect you; other lives and livelihoods need factoring into your plans:

Partner/spouse: If you are married or partnered, examine your partner’s situation. Can/will they retire at the same time? What is the age gap between you? Will they be dependent on your income in retirement? How is their health?

  • Children: Most CEOs want to set up their whole family. That means taking your children’s situations into account. How old are they? How self-sufficient are they financially? What debts are they carrying? Is there money already put aside for them?
  • Grandchildren: Is there another generation for you to consider as well? Can/will you assist with their education or help them onto the property ladder?
  • Parent/parents-in-law: The sandwich generation is having to fund or support their parents’ care often financially. Will this burn a hole in your pocket that you can’t afford?
  • Your future self: consider how your own future health may impact your family; if something happens to mum or dad, can they afford to look after you? Will doing so risk their own retirement plan?

Providing for all these people will ultimately determine the size of your retirement kitty and how those funds get dispersed.

What do I need to make retirement work?

What involves determining precisely what you have and what (if any) gaps you need to fill.
Review your assets and liabilities, including those that are yet to be realised (share options, payouts, tax liabilities, and so on). It can be easy to overlook aspects of both, such as capital gains tax on the sale of investments or cash in offshore bank accounts.

Also look at insurances, such as life cover. What changes come into effect under your policy terms once you stop working? Will you still have cover once employer super contributions cease?

Consider your health too. What needs do you/will you have?

Where you plan to retire

Think of where both in terms of geography and finances. Where will you live in retirement? Will that holiday home become your permanent address? Will you downsize? This can drastically impact your net worth and tax payable.

Similarly, where will you generate the best super returns before and after you start drawing down from it? Where can you shave off costs and minimise tax? Where will you be eligible for subsidies and discounts as a retiree?

When you plan to retire

When you retire is another important consideration.

Where in the financial year you retire and when your final payout hits your account impacts your taxable income.

  • The value of your superannuation and assets according to current market conditions.
  • How the company is placed at your retirement affects the value of any shares and options.
  • Similarly, the company’s prospects may affect your legacy and reputation.
  • When you retire may be forced on you if ill health arises.

Hence, when you retire can quite literally be a difference of thousands of dollars (or more).

How you plan on retiring?

With all these covered off, determine precisely how you will transition to retirement. Many business leaders struggle to adjust to their post-work lives, losing a sense of purpose and/or feeling as if everything has come to a sudden, grinding halt.

So plan not just the financial side but what your everyday life looks like. Hobbies, travel, time with family and writing books to impart your expertise are popular. Semi-retirement is another option through consulting or volunteer work.

Your activities in retirement affect not only how much you spend but also your overall health and wellbeing too. And you haven’t worked hard your whole life to spend your twilight years bored and miserable.

Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce: Your Survive and Thrive Financial Guide.

Note this is general advice only and you should seek advice specific to your circumstances.

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