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Budgeting for retirement is like preparing for an epic journey! Packing the right items and planning ahead is essential to ensure you don’t run into any surprises along the way.

Why plan for your golden years?

Just like a trip, when you’re ready to retire, it’s essential to have enough money saved to buy the things you need and do the things you want to do.

As at June 2022, there were 2.5 million Australian retirees receiving a part or full pension, and 1.8 million retirees without the Age Pension.

According to the Retirement Confidence Report, 38% of the 1,500 Australians surveyed over age 50 felt some anxiety about not having enough retirement savings. Issues like maintaining your lifestyle, qualifying for the Age Pension, maximising social security benefits, living arrangements, and capital expenses, to name a few, may be cause for sleepless nights. To help ease your concerns, be sure to plan ahead for your golden years. Here are four key points to get you started.

1. Your retirement income needs

When you retire, you’ll need to survive on the income you can derive from the capital you accumulate during your working life, with the Age Pension as a safety net if you’re eligible.

To determine how much income you will require in retirement, do a budget now and take out all your work expenses. Consider two types of income needs: First is your basic necessity income to meet your day-to-day expenses. Second is discretionary income to cover irregular expenses, including holidays, entertainment, health care, hobbies, etc. Look to include capital expenses like holidays, debt repayments, home improvements, and gifts to children.

2. Your assets

Work out what assets you wish to keep and whether there are assets that should be sold, upgraded, or downsized. You may decide to sell assets to generate a capital amount which you can invest in income-generating assets to increase your retirement income.

3. Your living arrangements

Owning a home may help you to be eligible for a higher level of social security income support as the home is an exempt asset. If you plan to downsize, the downsizer contribution to super strategy can help turn equity into tax-effective income in retirement. If the home is the main asset and you want to stay, and if income sources are inadequate, you may look at a reverse mortgage or other equity release scheme to fund retirement income needs or capital expenditures.

Renting? Your living expenses are likely to be higher, so generating income to cover your accommodation costs needs to be generated with less volatility and risk.

4. Your health issues

Allow for a greater lifespan due to increasing life expectancy, as each person has a 50% chance of living beyond our life expectancy. Consider how long you think you’ll live given the longevity of your parents and your personal health and lifestyle choices, your medical history, the potential need to access aged care services in your home or aged care facility, and the costs of these services.

However, wealth and health issues are not the only issues keeping Aussies up at night. In a recent survey, two thirds of the respondents had difficulty transitioning from their career to retirement.

  • 37% missed the day-to-day social interactions with colleagues,
  • 32% had difficulty getting used to a new and different routine and
  • 22% struggled with finding meaning and purpose to their days.

In addition to addressing your financial needs in retirement, it’s also important to consider aspects such as maintaining meaning and purpose, and understanding your needs and wants in retirement, including how you plan to spend your time and energy.

Do you want to save the world? Do you want to learn? Do you want to enhance your life with family and friends? Do you want to just have fun? Is de-stressing your only goal? Beyond the honeymoon period of retirement, what do you plan your life will look like?

Think of a lifestyle behind grandkids, gardening, Grey nomading, and cruise ships.

Get advice

Planning ahead will ensure you have everything ready when it’s time to retire. So consult South Eastern Wealth and begin preparing for a secure and purposeful ‘holiday’ now.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.