If you’re starting to consider how to plan for retirement, generally speaking, the earlier you start to plan, the better.
When left to the last minute, it may be necessary to employ higher risk strategies to reach the desired asset levels to fund your retirement, by the time you wanted to retire. This high risk route can pose a significant threat to an investor’s retirement plans should markets turn unfavourably on them.
Hence, we recommend proactively planning for your retirement. Doing so allows for a lengthier investment horizon where income can accumulate slowly over long periods of time, therefore reducing the amount of necessary risk to achieve your retirement objectives.
There are several important things to understand how to plan for retirement. Although each investor is different due to their various personal or financial circumstances and their perspective on investment styles and financial products, the steps below may help as a general guide to assist those who wish to begin planning for retirement.
STEP 1: Consider Your Current Position
Think about where you are at right now, today.
This includes listing out all your assets and debts to estimate your net worth, looking at your superannuation balances and how they are being invested and determining what you are able to start attributing to your retirement plan from your current sources of income. This will show you your starting point for your retirement planning journey.
STEP 2: Consider Your Retirement Objectives
Determine what your ideal retirement looks like and when you would like to retire.
What level of income would you require, taking into consideration all your goals such as pursing hobbies and aspirations, travelling or spending time with family? Consider where you would live and what debt levels you may still have in retirement to consider, if any. This can give you an idea of where you are heading on your retirement planning journey.
STEP 3: Bridge the Gap
Now that you know where you are and where you intend to be at retirement, you can determine the difference between these two places and put a plan in place to bridge the gap.
Depending on how much work needs to be done, you may be able to put a simple savings or debt repayment plan in place or you may need to employ the help of a professional adviser to assist you in determining the best strategy to help you reach your retirement goals as safely as possible.
If in doubt, always seek professional help when planning for your retirement. While there is some degree of incentive offered to retirees from government income sources, for the average investor, the Age Pension is insufficient to fund the retirement lifestyle they envision for themselves. As such, planning for retirement is an important consideration for every investor, regardless of age.
If you would like more information or wish to speak to one of our financial advisors, contact our team today at 1300 473 347 or book in a consultation.