If you’re in your late 40s to mid-60s, welcome to the pre-retiree club! It’s a wild ride, isn’t it? You’re not quite ready to kick up your feet, but the dream of leisurely days is within sight.
Many like you are in the prime of their careers, possibly occupying senior roles. While you might still relish the buzz of your working life, there’s that growing excitement and perhaps a hint of trepidation about the leisurely days on the horizon. And amid all this, many of you are part of the sandwich generation—caught between the responsibilities of young kids and ageing parents. It’s a balancing act that brings its own set of challenges and rewards.
These are pivotal years, where every decision you make carries a profound impact on the tone of your retirement. Whether it’s ensuring a comfortable nest egg, planning long dreamt-of travel adventures, handling the pressures of the sandwich generation, or simply securing peace of mind for the future, your choices during this phase have lasting consequences.
In this blog, we’ll guide you through the essential financial steps to navigate this multifaceted journey and ensure a smooth landing into those golden years. Ready to dive in?
Essential Financial Steps for Australian Pre-Retirees
1. Take Inventory of Your Assets & Liabilities
Imagine setting off on a road trip with no indication of your fuel level. You’d be driving with a worry of running out of petrol in the middle of nowhere! The same principle applies to your retirement journey. By having a clear snapshot of where you stand financially, you can make informed decisions, avoid unnecessary hiccups, and aim for a smooth sail into your retirement years.
It is also crucial to keep track of your finances. There exist several personal finance budgeting tools that make tracking effortless. If you’re more traditional, even a simple spreadsheet serves well. Reassess your financial landscape often and/or speak to a trusted financial advisor, to maintain a healthy fiscal position.
2. Deal with Your Debt
Carrying a significant debt load into retirement can be like having a persistent leak in your boat while trying to sail into calm waters. Not only does it eat into your savings, but it can also limit the lifestyle choices you’ve worked so hard for.
Here are some strategies to tackle debt in pre-retirement:
- Paying off the debts with the highest interest rates first can save you heaps in the long run.
- Look into debt consolidation loans which might offer a lower interest rate, making it easier to manage.
- A bit of sacrifice now, like skipping the occasional cafe brekkie, can lead to significant savings that can be redirected towards debt reduction.
- Setting up automated payments can ensure you never miss a deadline, helping you avoid late fees and further interest accrual.
- Consider picking up a side gig, freelancing, or selling unused items around the home. The additional income can accelerate your debt payoff journey.
Beyond the clear financial benefits, there’s a deep-seated psychological peace in living debt-free. No more sleepless nights over unpaid bills or stress about the next unexpected expense. You’re free to enjoy your retirement the way you want to!
3. Develop Your Pre-Retirement Spending Strategy
A budget isn’t just about counting pennies. It’s about understanding where your money is going and ensuring it aligns with your future dreams. Crafting a budget tailored for pre-retirement allows you to anticipate and adapt to changes in income and expenses. Plus, it helps ensure that hard-earned super doesn’t evaporate quicker than a puddle in the Aussie sun!
Simulating your retirement spending can be a brilliant way to spot any gaps or areas of adjustment. Live on your anticipated retirement budget for a month or two. It’s a practical sneak peek into how your retirement cash flow might feel.
4. Plan Your Retirement Income
While free time is abundant in retirement, money isn’t unless we plan for it. Some Aussies rely on the following sources of retirement income:
- Pensions: The Age Pension can be a primary or supplementary source, depending on your financial scenario.
- Investments: Shares, bonds, or mutual funds can provide dividends or interest.
- Rentals: Got an investment property or thinking of renting out a room in your house? This can be a steady source of income.
- Part-time Work: Who said retirement means giving up work entirely? Some folks enjoy part-time roles to stay active and earn a bit on the side.
Diversity isn’t just the spice of life; it’s the safety net of retirement income. Relying solely on one income stream can be a bit dicey. Instead, consider spreading your investments across various assets. The idea is simple: if one area faces a downturn, others might still hold strong or even thrive.
5. Review Your Entitlements
With Australia’s robust social security system, there’s a good chance there are benefits you might be eligible for such as:
- Age Pension: This is a regular income source provided by the government to help cover living costs for eligible retirees.
- Commonwealth Seniors Health Card: Provides older Australians with access to cheaper prescription medicines and other concessions.
- Pensioner Concession Card: Offers discounts on utilities, public transport, and more.
- Veteran Affairs Benefits: For those who have served, there are additional entitlements to be aware of.
Understanding and tapping into these benefits can be instrumental in ensuring a comfortable and financially stable retirement.
6. Plan for Retirement Care
With age may come a few creaky joints, glasses, and occasionally, more serious health concerns. From routine check-ups to specialist appointments or even long-term care, understanding the potential health challenges ahead allows us to plan better.
Medical and care costs can be a significant expense for many retirees in Australia. It’s essential to get a grasp on these potential costs early on:
- Government Subsidies: The Australian government provides some subsidies for aged care, but it’s crucial to understand the criteria.
- Private Health Insurance: Consider policies that cover common age-related procedures or care needs. Weigh up the premiums against potential benefits.
- Good Health: A Double Bonus
Maintaining a healthy lifestyle isn’t just about feeling great; it has a financial upside too! By staying active, eating well, and routinely checking in with health professionals, you could reduce potential medical costs in the future.
7. Consider Working as Long as You Can
From a financial perspective, extending your working years can give your superannuation a hearty boost. It means more contributions, potentially greater investment returns, and less time you’ll be drawing down on it in retirement. On the mental side, maintaining a work routine can offer social interactions, a sense of purpose, and mental stimulation, all of which are valuable for our overall health.
Here are some job ideas for the semi-retired:
- Consulting: Leveraging your years of experience can be valuable for businesses, big or small.
- Tutoring: Share your knowledge with the next generation.
- Local Community Roles: Many community centres or local councils look for experienced individuals for part-time roles.
- Freelancing: Whether it’s writing, designing, or any other skill, the digital age offers ample opportunities.
While the merits of working longer are evident, it’s also essential to listen to yourself. Recognising when you need more personal time, or when work is impacting your health or well-being, is crucial. Retirement is, after all, a time to enjoy the fruits of your labour.
8. Use Retirement Advisors the Right Way
Setting sail into the retirement seas can be smoother with an experienced navigator on board. Retirement advisors can:
- Help set clear financial goals and paths to achieve them.
- Offer tailored advice based on your personal and financial circumstances.
- Keep you updated on legislative changes and how they might impact your nest egg.
With a team of experienced and certified financial advisors, Retirewise can help you prepare for your retirement.
Schedule a free strategy session with our team of certified advisors. We will sit down with you to discuss your goals, evaluate your assets and liabilities, and outline strategies that are tailored to you.
Click below to schedule a strategy session with Retirewise Australia and start turning your retirement dreams into reality.