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3 Major Financial Decisions to Make Before Retirement

November 29, 2022 | Retirement Planning

With Australian life expectancy increasing and less certainty in the world’s financial markets, it’s more vital than ever to make sure your money lasts. Even if you’re still working, the years before retirement are critical to assessing your finances and making financial decisions that will affect the rest of your life.

You must make certain financial efforts to secure the enjoyable and worry-free retirement you’ve always desired in Australia. Before you enjoy your retirement cake in the break room and get your last paycheque, make sure you plan ahead and know your answers to the following critical financial decisions.

Retirement Financial Decisions

1. When to Retire

The decision of when to retire is critical because it determines the amount of time you have to save and invest. This is a decision that’s unique to you and right for your life stage. If you’re like most people, your situation will play a big part in your decision.

To decide when to retire, you must consider several factors, including:

  • Your current income
  • How much money you have saved and how much money you can save before you retire
  • What kind of government benefits you may be entitled to and when they would come into effect

Many people are forced to retire early because of unforeseen circumstances such as illness, injury or redundancy, for example. If you’re in this boat, you can find more strategies to manage your money in the following sections. But first things first: how much money will you need to live on in retirement?

Calculating your ideal retirement income

To figure out how much money you need to sustain yourself in retirement, think about how much you currently make and how much you need to live on. If you’re like most people, you’ll want to adjust your lifestyle to live on less money than you currently make. Where can you adjust your expenses?

Step 1 is to create a retirement budget. This will help you figure out how much money you’ll need to live comfortably in retirement – this includes day-to-day expenses as well as ad hoc expenses such as travel or hobbies (it’s important to be realistic about your spending habits).

This Budget Planner from MoneySmart can help you get started,

If you continue with your current savings plan, you can now estimate how much money you would likely have when you want to retire and how much retirement income it would offer. Will your savings be sufficient to meet your income requirements?

2. Where to Invest

You have many potential investment vehicles available to you, and many more investment options within these vehicles – all with their own pros and cons. This volume of choices alone can make the decision of where to invest overwhelming.

Regardless, retirement investors should typically maintain a diverse portfolio with a balance of growth assets like shares and real estate and defensive assets like term deposits that also considers their risk and volatility tolerance.

If you want to invest , you’ll need money to:

  • Create a nest egg of savings
  • Make investments
  • Plan for retirement

You need money to cover all of your retirement needs, as outlined in the previous section. If you don’t currently have any money to invest, you have a few potential options to make more money so that you can invest more.

  • Identify income-generating strategies to make more money, and then focus on creating a positive cash flow.
  • Identify investments that can potentially provide a steady income stream and seek advice on how to invest in them to achieve your goals.
  • Set up a budget and stick to it. The more money you can save, the more you have to invest for retirement.

For more guidance, you may also consult a financial adviser specialising in retirement who can help you create a plan to ensure your strategy and investments are in line with your needs and goals, giving you peace of mind for the future.

3. What to Do With Your Super

The Australian Government understands that your superannuation fund is important to you, and they have set up a few options to ensure you can access your own money. After you retire, you have three options for your super:

  • Take a lump sum
  • Convert it to a income stream and take regular payments
  • Rollover to an alternative product such as an annuity

The best option for you depends on your financial situation. Make sure to consult a professional financial adviser before you take the plunge so you can be confident you have made the best choice for your situation.

Get Ready for Retirement with Coastal Advice Group

After you retire, you won’t be able to make up for the lost time. Even if you’re in your late 50s or early 60s, it’s smart to start planning for retirement years before it’s too late. The steps you take now will be worth it in the end.

Coastal Advice Group is a team of experienced financial advisers here to help individuals make better financial decisions and get retirement ready! We have offices located in Newcastle, the Central CoastSydneyPort Macquarie, and Byron BayCall us or book online to secure your first appointment with us today and get started!