What to do in the year before you retire
22 January 2018
7
min read
If 2018 is the year for you to finally stop working in paid employment, now is the time for some serious planning. These are the questions you need to answer to ensure you will be ready to retire.
Retirement can be such a huge lifestyle change that the last thing you need is added stress caused by a lack of preparation.
Knowledge about some of the key impacts of retirement – or at least a checklist and knowing who you can contact for help – may be helpful.
One way to access information is to attend seminars, such as Retirement Ready, so that in less than a day you can find out what you need to be ready for retirement including government entitlements, how much money you might need, estate planning and lifestyle factors. The seminar is tailored specifically to people planning to retire in one to two years.
Most Queensland Government employers have the ability to allow special leave so their employees can attend a pre-retirement seminar. The registration and confirmation letters QSuper issues before the event is usually enough to get this leave approved, however you would need to check with your employer for any specific requirements.
The reality is that there is plenty to think about in the months ahead of retirement. Consider this checklist.
How will I pay for retirement?
Superannuation is most people’s largest asset after their family home and forms the bulk of their nest egg. If you’re retiring this year you should know your balance, the value of other assets, and have an idea of your age pension eligibility.
The Association of Superannuation Funds of Australia (ASFA) says government pensions are the principal source of income for 70% of retirees.1 However, many people retire on a combination of a part pension and income generated from personal assets.
How much money will I need?
ASFA’s Retirement Standard2 is updated regularly and shows how much income singles and couples will need for a comfortable or modest retirement. For a comfortable retirement, the ASFA Retirement Standard calculates a 65-year-old single person requires $44,011 a year and couples require $60,457.
To fund this lifestyle using a combination of super and part pension, a single person needs $545,000 and a couple $640,000, ASFA says in its September 2017 quarter publication. For retirees seeking a modest retirement, the income requirements ($24,506 for a single and $35,189 for a couple) need only $50,000 for a single and $35,000 for a couple because the age pension covers most of their expenses, it says.
Are my debts repaid?
It’s becoming more common for Australians to head into retirement with debt, mainly mortgages. Paying this off should be a top priority for any new retiree, and may require some super or proceeds from selling other assets. Being debt-free will simplify anyone’s retirement finances.
What other investments do I have?
Many retirees have assets outside of super including investment properties and share portfolios. You should consider these assets in any retirement income strategies.
What Age Pension benefits can I get?
Centrelink provides detailed information about the Age Pension including eligibility rules, income tests, asset tests and payment rates. Eligible singles can receive up to $894.40 a fortnight and couples $1348.403. If you prefer to speak to someone you can phone Centrelink’s Financial Information Service on 132 300.
Will I downsize my home?
It can get difficult for some people to look after a large family home, and downsizing potentially frees up extra cash. New rules are set to start from 1 July 2018 that will allow eligible seniors to each pump up to $300,000 of the proceeds from downsizing their home into their superannuation, in addition to existing super caps and restrictions.
How will my lifestyle change?
Are extra holidays on the cards? Do you need to upgrade your vehicle or household furniture? Planning any new hobbies? Factors such as these that will likely affect your financial budget, and should be considered.
Do I have a budget?
After you retire there are no regular wages to top up your income if needed. This makes budgeting more important as each dollar should be watched more closely. There’s plenty of free calculators and budget planners available online, including at moneysmart.gov.au4.
Is my estate planning sorted?
A current will is vital, but it’s not the only part of estate planning that should be addressed before retirement, and whenever your circumstances change.
Considering appointing a power of attorney, which gives someone the authority to manage your affairs if you can’t do so yourself. An enduring power of guardianship enables someone to decide where you live and your medical care, while advanced healthcare directives deal with what happens to your body if you can’t make decisions yourself.
1 ASFA Super Statistics. https://www.superannuation.asn.au/resources/superannuation-statistics. Accessed 30 November 2017.
2 ASFA Retirement Standard. https://www.superannuation.asn.au/resources/retirement-standard Accessed 30 November 2017.
3 Age pension details as at November 2017 from the Department of Human Services. https://www.humanservices.gov.au/individuals/services/centrelink/age-pension Accessed 30 November 2017.
4 Australian Securities and Investment Commission (ASIC), https://www.moneysmart.gov.au Accessed 17 January 2018.
5 Advice fees may apply. Refer to the Financial Services Guide for more information.