Retirement Planning

Retirement Financial Planning

It’s never too early to start planning for your retirement. But how do you know what you need and where to begin?

This is where a financial planner can help. With their guidance, you can set achievable goals and plan the retirement of your dreams.

What Is Retirement Financial Planning?

Retirement financial planning is about preparing for the financial and lifestyle changes that come with retirement. It’s about managing your money today so you can enjoy your golden years when the time comes.

There are several important elements involved in retirement planning:

• First, you’ll need to decide when you want to retire. Your timeline might change along the way, but it’s a good idea to have a starting point.
• Next, think about what matters most to you—plan for social activities, travel, and other expenses. Consider whether you’ll change careers or continue working where you are.
• You’ll also need to estimate your living costs. When you retire, you’ll want to maintain the same quality of life. Consider where your income will come from, such as pensions, savings, and superannuation.
• Finally, start earlier rather than later. Contributing more to your super can significantly boost your retirement income. You can also focus on eliminating debt—including your mortgage—and building a solid savings buffer.

How to Calculate Your Retirement Financial Planning Needs

Financial planning for retirement is a personal process that will depend on your financial situation and goals.

How much will you need exactly? There’s no hard-and-fast answer. But you can use a few calculation methods to get a rough idea.

The first is the simplest. Take 65% of your current income. Then, multiply that figure by the years between your retirement age and the average life expectancy (in Australia, this is 83.2 years). This will give you a lump sum to aim for.

Another method is to use the Association of Superannuation Funds of Australia (ASFA) Retirement Standard:

• For a comfortable lifestyle, couples should aim for $72,148.19 annually and singles $51,278.30.
• For a modest lifestyle, couples should have $46,994.28 annually and singles $32,665.66.

Of course, these calculation methods don’t account for your goals or needs. The most effective way to plan for the retirement you want is to work with experienced retirement planners.

What Are the Advantages of Self-Funded Retirement?

Aiming for a self-funded retirement means you won’t rely on government pensions to fund your lifestyle after you retire. Instead, you’ll use your savings and investments.

Advantages of this approach include greater flexibility, financial security, and control over lifestyle.

Retirement Planning Investment Strategies

Whatever your situation, investing your money will be vital to growing your retirement savings. Investing enables you to take advantage of compound interest—put simply, this means earning interest on your money.

Compound interest adds up significantly over time. It’s all about putting your money to work so you can retire sooner and have more cash in the bank.

Here are some investing basics to keep in mind:

Consider Your Investing Profile

Before investing, understand your risk tolerance. Consider the time until you’ll need the money and how much risk you can handle.

Depending on your circumstances, you can take a:

• Conservative Approach: This is preferable if you are older. It focuses on lower-risk investments to avoid market volatility.
• Aggressive Approach: This is suitable for younger investors. Higher-risk investments can yield higher returns but come with greater risk.

Think about your liquidity needs. Do you need quick access to cash, or can you lock your money in investments?

Decide What to Invest In

Choose from a wide range of investment options. Your choices should reflect your risk tolerance, investment goals, and preferences. Your options include:

• Shares: Potentially higher returns but more volatile
• Bonds: Provide regular interest payments and are lower-risk
• Property: Can generate rental income and appreciate over time
• Mutual Funds and ETFs: Offer diversification by pooling money to invest in a variety of assets

Always Diversify Your Investments

Building a diversified portfolio minimises your investment risk. It’s the opposite of putting all your eggs in one basket.

Choosing the Best Retirement Planners

A retirement planner can help you build a solid strategy that meets your specific needs and aspirations.

When selecting a retirement planner, consider these factors:

• Services: Ensure the planner provides all the services you need. This might include investment advice, tax advisory, estate planning, and life insurance.
• Fees: Be clear on their fee structure. You should know exactly how much you’ll be charged.
• Ownership: Check who owns the company. Independent firms might offer unbiased advice.
• Links to Product Providers: Be aware of any affiliations with product providers. This could influence their advice.
• AFS Licence: Ensure they hold an Australian Financial Services (AFS) licence.

At Rising Tide, our passion is helping hard workers like you enjoy life to the fullest after retirement. We believe in transparency and honesty at every stage of retirement planning.

If you’re ready to start planning for your retirement, get in touch or learn more about our process. We’re more than happy to discuss your goals.

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