The first step in any sound retirement plan should be choosing when you want to retire.
All roads lead to this landmark.
Typically, most people will aim between 65 and 67 years of age, or around when they’ll qualify for the Age Pension.
While age has traditionally been the deciding factor for retirement, how much you have saved for retirement is increasingly becoming just as, if not more, important. Especially if you have the option of working all the way to retirement age and beyond.
Health is another ‘decider’. Being healthy enough to work well into later life leads many to do exactly that. For others, health is the most important factor for retiring and will also influence how much you can save as well as the type of retirement lifestyle you’ll have.
Can you stay healthy into the later years of your career? Will you stay healthy enough to work full-time hours? Will you need to stay close to certain amenities and health facilities once you retire or will you be able to retreat to the hills for the early part of your post-work years?
Health, for most, will be the most influential factor on when and how you retire.
So, is there a magic formula for finding the right retirement age?
Not really. You could retire earlier or later, depending on your financial and health situation. And the timing that works for someone else may not work for you.
We’ve already covered what may be the most important factors for choosing when to retire, but there are a number of other things to consider, such as:
- your desired retirement lifestyle
- how much income you’ll need to sustain your lifestyle
- your existing assets, how much you already have saved and how this can generate retirement income
- your investment strategy and risk tolerance
- how long you’ll live
- your expected retirement income sources (Age Pension, superannuation, savings, investments, property/ies, shares, etc)
- your health (and your partner’s health) and how much you may need to spend on health care, possible long-term care and aged care
- your tax situation in retirement.
The YourLifeChoices Older Australian Insights Survey 2021 revealed that one of the biggest concerns when planning for retirement is ensuring you don’t outlive your money.
And yet when asked whether respondents were confident their savings would provide an income for life, 57 per cent said no.
A good financial advisor, or access to trustworthy financial advice, is paramount to making the best case for retirement, so why would four in 10 retirees not seek this advice in the lead-up to retirement?
The Financial Services Royal Commission may have put a dent in financial services industry’s reputation, but there are still good eggs out there and, coupled with the rise of robo-advice, those planning retirement should be actively seeking out good advice (or reading and telling their friends about YourLifeChoices [insert winking emoji here]).
Before deciding on the ideal time to retire, you’ll also need to consider the best age to retire for your spouse if you both work. This will help you figure out the best way to move your money around and get the best entitlements and concessions.
You may also want to identify any other gaps and work out how to bridge them. For instance, if you’re worried about a guaranteed income, then it makes sense to purchase an annuity. If you’re concerned about health care, you might want to ensure you have an affordable health insurance policy that covers you in retirement.
Whether you retire early, on time or later, keep in mind that the earlier you retire, the longer your money has to last.
Retiring at 55 sounds like a dream, but considering you’ll have around or more than 30 years in retirement – assuming of course you have good health – you’ll need enough money to last that long. Retiring at 65 can ease some of the pressure to save more.
You also have to consider how early retirement affects your Age Pension. The earliest age you can access this payment is, currently, 66 years and six months.
If you retire before then, you’ll either be living solely off your own savings, or supplementing your income with another form of government assistance, which comes with its own set of hurdles.
If you don’t have what you need to enjoy a comfortable retirement, you’ll have to work longer or change your notion of a dream retirement lifestyle.
And coming back to the health thing, you may end up being forced into early retirement if you experience an illness or disability that keeps you from working, so it pays to plan for that eventuality, too.
Putting off retirement past traditional retirement age is another option if you have it. You may be one of the lucky ones who loves your job and is content to work for as long as you’re healthy and able.
For those who got a late start on retirement savings or who experienced a financial setback, working longer may be necessary to build, or rebuild, their retirement savings.
Regardless, delayed retirement means you can accumulate as much money as possible and contribute to a healthier retirement once you’re there.
Nice, if you’re able to stay healthy and continue working, but there are some drawbacks to delaying retirement, such as postponing travel plans, delaying moving or downsizing or less time with the people you care about most.
Finding the best age to retire isn’t always easy, which is why a financial adviser can help, by reviewing your plan, your savings goals, income, retirement assets, expected entitlements and longevity expectations and objectively evaluating them.
Or you can be one of those retirees who is confident about their retirement, but not so confident their money will last as long as they need it.
Are your retirement plans working out as you’d expected? Did you or do you need help putting them together? Why not share your suggestions in the comments section below?
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