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What you need to do before you retire - 16th September 2019
If you haven't given any thought to what your
retirement will look like, now's a great time to start. It might not be the
most fun thing to think about - not when there are vacations to plan or houses to
buy - but retirement planning is a vital part of your overall financial plan.
Most people dream about the day they no longer
have to work. They dream of having a leisurely coffee in the morning without
running to a meeting or they want to spend six months of the year visiting
exotic locations. Being able to do so requires planning. It means you have to
think about your financial future and take steps to make sure you can afford
the lifestyle you want to live.
Here are some things to do before you retire.
Examine your retirement
needs
Before you can even begin to think about how to save for retirement, you need to know what you want your retirement to look like and how your finances will affect it. Consider how you want to live in retirement. Will you want to travel a lot? Downsize your home? Have your regular home and a holiday spot? Will you need to renovate your house?
You also need to know what you'll have to pay
for, and how. Do you currently own a home but plan to sell it to move into
something smaller? Will your home be paid off by the time you retire? Do you
want to maintain certain investments in your senior years or would you prefer
to be liquid?
Next look at the income you'll have. What will
your current investments likely provide for you as you age? What will your
pension be? Will you have income you can count on beyond a pension? Are you
eligible for other entitlements?
Having a firm understanding of how you want
your life to look as you age and what money you'll have to live off will help
determine how you can start saving today for retirement and help you sort out
when you can afford to retire.
Deal with your debt
Next you need to look at the debt you currently
have and make a plan to deal with your bad debt. Although many people think
all debt is bad, in truth there is good debt. Good debt is part of a strategy
that builds your wealth over time. Owning a home can be good debt. Bad debt
takes away from your wealth. This may be through interest, such as on credit
cards for example.
Retirement will be less financially stressful if
you can reduce your bad debt before you retire - and preferably well before you
retire.
Then examine whether there are other financial
matters that need addressing. Do you have a current will? Is your insurance up
to date? Should your investments be reviewed? Is it worth it to make
additional superannuation contributions?
Final thoughts
Once you know what you want your retirement to look like and you have an idea of your finances, you need to develop a financial plan. Retirement savings don't just happen with good intentions. It takes planning, saving, and understanding what financial vehicles are best for you to make your dreams a reality.
Talking to us can help you sort out what you need to do now, a few years in the future and as you enter retirement to ensure you're as financially comfortable as possible.
AV Chartered Accountants - Committed to Your Business Success
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