Your 7 Point Retirement Planning Checklist

Recent research¹ reveals confidence about retirement is on the slide. Here are some big points to consider to help you start planning.

Socialising with mates, enjoying leisurely activities and indulging in the odd trip away are all things that have likely crossed your mind when thinking about how you’ll spend retirement.

Beyond that though, have you given much thought to the logistics and what it’ll cost? If you haven’t, you’re not alone.

Research¹ reveals that almost half (46%) of working Australians don’t know how much they will need to have saved for retirement.

And perhaps this is because so few of us have set specific goals. Only 24% have a financial goal, with the rest of us yet to put pen to paper and flesh out what we’d like to achieve after we finish working.

Given all this, it’s not surprising our confidence about retirement is on the slide. More than one in five (21%) of working Australians are not at all confident they will be able to achieve their desired standard of living in retirement. That’s down four percentage points since the previous survey two years ago. And fewer than one in ten (9%) are very confident – down five percentage points.

So if you’re thinking of getting on the front foot with your retirement planning, here’s a useful checklist with the big points to consider.
 

Do I have to retire by a certain age? 

The retirement age in Australia isn’t set in stone. You can retire whenever you want to, but factors that could play a part might include: 

• your health
• financial situation
• employment opportunities
• your (and your partner’s) individual preferences
• the age you can access your super. 

What’s on my to-do list? 

Think about what you may like to do in retirement and what the bigger and smaller priorities may be. Consider things such as: 

• your social life and recreation
• staying active and healthy
• different retirement living options, which might include relocating to a new city
• helping the kids, if you have any. 

How much money will I need 

According to the Association of Superannuation Funds of Australia’s (ASFA) June 2022 figures, individuals and couples around age 65 who are looking to retire today would need an annual budget of around $47,383 or $66,725 respectively to fund a comfortable lifestyle². 

To live a modest lifestyle, which is considered better than living on the age pension alone, individuals and couples would need an annual budget of around $30,063 or $43,250, respectively². 

All these ASFA figures are based on the assumption people own their home outright and are relatively healthy³, and are compared to the Government’s current maximum age pension rates below⁴. (These rates assume the maximum pension supplement and the energy supplement). 

Where will my money come from? 

The money you use to fund your life in retirement will likely come from a range of different sources, such as: 

Your super fund 

Generally, you can start accessing super when you reach your preservation age, which will be between 55 and 60, depending on when you were born, and retire. Knowing your super balance is a crucial part of planning for retirement, as it's likely to form a substantial part of your savings. 

If you’ve got more than one super account, there may also be advantages to rolling your accounts into one, such as paying one set of fees. However, there could be certain features lost in the process, such as insurance, so make sure you’re across everything before you consolidate. 

Investments, savings or an inheritance 

You may be planning to sell or use income you’re generating from shares or an investment property, or use money you’ve saved in a savings account or term deposit to contribute to your retirement. An inheritance or proceeds from your family’s estate may also help in your later years. 

Government benefits 

Depending on your circumstances, as well as your income and assets, you may be eligible for a full or part age pension from age 65 to 67 onwards (depending on when you were born), or you mightn’t be eligible at all. 

Along with your savings, government benefits, such as the age pension, as well as Carer’s Allowance and the Disability Support Pension, could be an important part of your retirement income. 

Concession cards, which are provided if you receive certain government income support payments, or the Commonwealth Seniors Health Card could also help you access discounts on health care and other things. 

How can I withdraw my super?

Depending on how you withdraw your super and at what age, there will be different tax implications worth investigating, which will depend on your individual circumstances. 

In the meantime, some of the options you’ll have around withdrawing your super include: 

Transition to retirement pension 

A transition to retirement pension enables you to access some of your super via regular payments (once you’ve reached your preservation age), whether you continue to work full-time, part-time or casually. 

This may provide you with some financial flexibility in the lead up to retirement, but there will be things to consider, including that you’ll generally only be able to access a limited amount each financial year. 

Account-based pension 

If you’d like to receive a regular income when you do retire from the workforce, an account-based pension (also known as an allocated pension) could be a tax-effective option, noting the value of it will be based on the super you’ve saved, so won’t guarantee an income for life. 

You also won’t be limited in what you can take out, but each year you’ll need to withdraw a minimum amount. Note, you can generally only transfer up to $1.7 million in super into this type of pension too. 

Annuity 

Another option is an annuity product, which generally provides guaranteed payments over a set number of years, or the rest of your life, depending on whether you opt for a fixed-term or lifetime annuity. 

They tend to be a more secure option as they provide a guaranteed income regardless of what might happen in financial markets. However, you’ll be sacrificing some flexibility as you can’t usually make lump sum withdrawals and your life expectancy may also be a consideration. 

Lump sum 

Taking some or all of your super savings as a lump sum can be tempting, particularly if you want to pay off debt, assist the kids, or go on a holiday. However, it might not be the best option for everyone, as you’ll need to consider how you fund your lifestyle after the money is gone. 

While you may be eligible for government entitlements, such as the age pension, it might not cover the type of lifestyle you’d like to have after you finish working. 

What other matters will I need to address? 

Existing debt 

When planning retirement, you may want to consider what outstanding debt you have and ways you may be able to reduce it while you’re still earning an income. 

Check out these tips to reduce your debts before you retire and remember, if you’re experiencing financial hardship, talk to your providers, as most can assess your situation and help you find alternative payment plans. 

Insurance 

You might have personal insurance, possibly tied to your super fund, but it’s worth checking you have the right type and that it’s appropriate for you. After all, what you require in retirement could be quite different to when you’re working. 

Investment preferences 

Investments are part of many retirement planning strategies, and when you’re retiring, it’s worth reviewing your investment style and the options you’ve chosen. 

For instance, in retirement, you might consider a more conservative approach with less risk, as when you’re younger you generally have more time to ride out market highs and lows. 

Estate planning, including your will 

It’s important to think about your estate planning needs. For instance, have you documented how you want your assets to be distributed after you’re gone and how you want to be looked after if you can’t make decisions later in life? 

Do I want to make any final super contributions? 

The more you can put into super before retiring, the more money you’re likely to have when you retire. 

Check out these 10 ways to boost your super, noting there are annual concessional and non-concessional super contribution caps in place and if you exceed them, additional tax and penalties may apply. 

You may also be interested to know that when you reach age 60 or over, you can make a voluntary contribution to your super of up to $300,000 using the proceeds from the sale of your main residence. 

For couples, both people can take advantage of this opportunity, which means up to $600,000 per couple can be contributed toward super. There are however, downsizer contribution rules you’ll want to be across. 

Super rules do start to get a bit trickier as you get older and if you’re keen to know more, check out – super contribution rules when you’re in your 60s and 70s. 

It starts with super… 

Whatever stage of life you’re at, your super will probably become the cornerstone of your retirement strategy.  If you’d like to explore your options, contact your financial adviser. 

Speak to your financial adviser 

Regardless of what financial personality you are, speaking to an expert can set you on the right path – get in touch with your financial adviser.
 

¹    AMP 2022 Financial Wellness Research Report

^2,3 ASFA Retirement Standard - June 2022 figures

⁴   Services Australia - Age Pension - How much you can get - 20 September 2022 figures