Retirement planning will be one of the most worrying phases on your financial planning pathway. It is a time in your life that you will make decisions which will determine the lifestyle you will live in your retirement years, and with no safety net of a regular paycheck.
Retirement can be planned for, or it can come to us unexpectedly as a result of ill health or redundancy. And regardless of which pathway takes us there, important financial planning questions must be answered.
This question will depend greatly on how well you wish to live in retirement, and everyone’s expectations are different. Generally speaking, and in my experience as a Financial Planner, I am finding that a retired couple will currently require a minimum of $60,000 per annum to live a comfortable retirement.
A ‘comfortable’ retirement meaning having adequate funds to pay for your day to day expenses of a car, clothes, food, private health insurance and including approximately 25% of your annual income being spent on leisure activities such as entertainment and a holiday/trip away.
When you engage a Financial Planner to help you with your financial planning for retirement, the first order of business should be to identify your goals and aspirations in retirement, calculate how much money you will need in retirement and estimate the likely annual income you will be able to generate from your superannuation, access to Centrelink entitlements and other assets you own.
Your personal circumstances at retirement will be different to others, and therefore your approach on how you deal with your superannuation will depend on your circumstances. You may be retiring debt free, whilst others may be retiring with significant debt. You may also have significant health issues that need to be taken in consideration.
Upon retiring, there are four (4) main options available to you in relation to what you can do with your superannuation, and all of which can be used in combination as part of your financial plan:
Please also be mindful that each of the options above may have tax implications and Centrelink entitlement implications that also need to be taken into consideration and that you should seek advice from an experienced and licensed Financial Planner to help you understand all your options and the implications.
Given my years of experience as a Financial Planner specialising in Retirement Planning, and the outcomes I have seen and experienced with my retirement clients in that time, I personally believe this question should be given significant consideration when planning for retirement. And it is an question that many pre-retirees and retirees do not wish to consider or choose to procrastinate about.
Obviously the negatives of considering downsizing begins with having to deal with the life time of accumulated possessions and what to do with them; there can be a significant cost on changeover, including stamp duty, real estate agent commissions and other out of pocket expenses; and there is the emotional decision of selling the family home to name a few.
However the positive side of downsizing include financial benefits such as government assets and income tests may be affected positively and improving your Centrelink entitlements, less daily expenditure maintaining a smaller home, having additional cash to invest or pay off some debt, to name of a few.
Personally, I believe that all pre-retirees and retirees should consider downsizing for the following reasons:
Downsizing can come in many forms. It could be moving to a smaller house, an apartment, an over-55s retirement village which brings with it amenities and a lifestyle benefit, or it could mean moving closer to family, to name a few.
Downsizing will not be for everyone, and there may be valid reasons not to downsize.
However I firmly believe that when planning for your retirement, the question of downsizing needs to be given proper consideration and not be hastily dismissed.
Retirement is one of the most important life events you will experience, and achieving a ‘comfortable’ retirement comes with much planning and much ongoing focus and management of your financial affairs.
Commence with a proper review of your financial assets and liabilities, seek out appropriate advice to ensure you achieve the best possible outcome for your particular circumstances, and be committed to undertaking ongoing reviews of your retirement plan in to explore changes in policy and legislation that may impact your retirement income, thus ensuring the best possible outcome for a ‘comfortable’ retirement.
Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant for over 36 years, a Financial Planner for over 18 years and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading), and operated his own Real Estate business for property investment clients for over 5 years as a second business.
Financial planning services provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.
Taxation & Accounting services provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, IPA & NTAA.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
July 14, 2017
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The information provided on this website, including the material and contents provided in the website publications, are informative in nature only and you should not act specifically on the basis of this information alone. It should not be used as a substitute for legal, business, accounting, tax, financial planning or other professional advice. If expert assistance is required, professional advice should be obtained.
Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant since 1981, a Financial Planner since 1998, and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading) and operated his own Real Estate business for property investment clients for over 5 years as a second business.
Financial planning services are provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.
Taxation & Accounting services are provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, FIPA & NTAA.