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3 Important questions for planning your retirement

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.

 1. How much money is enough for my retirement?

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.

2. What should I do with my superannuation?

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:

  1. Withdraw and spend – not in a negligent way of course. If you are retiring with significant debt, you may choose to pay off all or some of your personal debt (including your home loan); as if you are over 60 years old there is not tax to pay on superannuation that is withdrawn from a taxed super fund.
  2. Leave your money in super – (if allowable by the super fund) can give you more time to decide how to best deal with it, or it can allow you to continue to make contributions to boost your funds and depending on your age and employment, or you may wish to buy some time to avoid a depressed financial market. However this may not be an option if the super fund you are in requires you to remove the funds when you turn 65, unless you transfer it into another fund; and, given that you could be taxed up to 15% by leaving your super in the fund, there may be more tax effective options available to you such as a retirement income stream.
  3. Keep it in super and start an income stream – this involves transferring your superannuation into a ‘pension phase’ Super Fund or Account and being able to draw down a regular monthly income from the Funds’ account balance. This is probably the most popular choice for retirees, and some income stream investments can be quite flexible giving you the option to draw down additional lump sums if needed. There can also be other worthwhile financial planning benefits such as paying less tax and your money may last your longer, but there are also minimum set amounts that must be drawn down each year, as regulated by the Federal Government, and which is a percentage of your balance based on your age.
  4. Withdraw as cash – also a popular choice. Generally speaking, retirees that withdraw their super as cash usually place it in a term deposit account. The mains reasons why this can be seen as an attractive option is if the financial market is depressed or volatile, you may feel more secure and in control, or feel unsure and intimidated by changes in legislation affecting superannuation and retirement funds. Although this option may help you pay off your debts, allows you to withdraw money in stages or spend as much as you want when you want and how you want, or will allow you to invest outside super; the risks are you may pay more tax, it is easy to fall into the trap of living beyond your means and the money may run out much sooner than you expect, and you may be foregoing significant capital growth which can help your retirement next egg grow and last longer.

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.

3. Should you downsize your family home?

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:

  1. Definitely the financial gains potentially to be made as stated in the paragraph above
  2. Easier and less costly to maintain as you get older, including gardens
  3. Consider being close to public transport for when driving is no longer an option
  4. Consider being closer to shops and amenities for when driving is no longer an option
  5. Consider the potential future and changing medical needs that will require changes to be made to your home in relation to stairs, size of doorways to accommodate walkers and wheelchairs, bathroom renovations, etc.
  6. Consider the future loss of a partner and its’ impact.

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.

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