Retirement is a double edged sword. Putting your working years behind you can feel like a huge relief and mean you can really live the way you want to. That said, getting to that sweet spot can be stressful.
At Invest Blue, we know that the right strategy and attitude can do wonders for reducing retirement planning stress. Here are our tips for building a stress-free retirement plan.
1. Know where you are in life
If you’re starting to feel stressed about affording retirement, it’s time to take an objective look at where you are and where you’re going. Start by pulling financial statements and investment portfolios – determine how much you have to your name and how that compares to what you’ll need by the time you want to retire.
Superannuation calculators may be able to give you some idea as to how your super balance will appreciate in the coming years, but remember that market fluctuations will affect the actual amounts. If your finances aren’t as you’d like – don’t stress yet. You still have time to prepare for retirement.
Whatever stage you are in life, it’s never too early to start planning for retirement.
2. Respect your short-term happiness
Growing your retirement savings is crucial to have a large enough nest egg to live the post-work lifestyle you dream of. That said, by tying up all of your savings into retirement, you risk sacrificing important freedoms of today and stressing yourself out.
Your ideal financial plan should grow your retirement fund while simultaneously supporting your short-term goals. The way these are balanced ultimately depends on your stage in life. For example, if you are closer to retirement, it may be worth focusing more on preparing your assets and establishing passive income so you can continue to thrive after leaving the workforce.
Meanwhile, if you’re only just starting a family you should still be thinking about retirement, but need to ensure your plan will allow you to achieve your shorter-term goals – like enriching family travel, education or investment.
3. Always look ahead
While we stress the importance of a plan supporting the “now”, you still need to think bigger picture. Consider the time between today and when you hope to retire.
Your financial plan needs to make the most of the time available to you. This means establishing a sensible risk tolerance and designing your investment strategies to suit. Thanks to compound interest, it’s never too early to start planning for retirement. Making the most of superannuation contributions and private investments at a young age can help you build greater long-term asset growth and enter a cozy retirement with as little stress as possible.
Your retirement is ahead of you, so there’s no point fretting over the past.
What happens quite often, however, is that you might not realise you should be thinking about retirement until you’re entering your 50s. This leaves around 15 years to catch up on retirement saving, but that doesn’t mean you should be seeking high returns at high risk, because it could be harder to manage losses. Nor does this mean you need to beat yourself up about the past years you haven’t been focusing on retirement – instead, look ahead to the future and determine what risks you can comfortably take.
4. Make the most of superannuation
Australia has a fantastic superannuation environment. Concessional contribution structures and catch-up schemes are designed to help Australians accumulate retirement wealth at a lower tax rate than their marginal rate.
Utilising your concessional contributions cap and catch-up allowance as you approach retirement will help you build your super quickly – saving you tax liabilities and retirement planning stress. As of July 2018, you’re able to contribute up to $25,000 to your superannuation, plus any amount of the allowance not utilised in the previous financial year.
For example, if you only accrued $10,000 worth of concessional contributions in 2018-19, you would be able to contribute an extra $15,000 in 2019-2020.
5. Plan for more than just money
Consider everything that might affect your retirement. Your super balance will help you with day-to-day expenses, but is there some way you could minimise those expenses today? Becoming debt-free by retirement can have a huge positive impact on your post-work life.
You should also think about your where you’ll live during retirement. Can you move into a family member’s home or is a retirement community on the cards? Or are you still paying off a mortgage? Planning to downsize after retirement means you’ll be allowed to contribute up to $300,000 of the sale proceeds to your superannuation as well as move into a more comfortable home.
Establishing these things earlier, rather than later, can help you build a clearer picture of what your retirement will look like.
There’s plenty to be accounted for in your retirement plan – so it’s not hard to feel overwhelmed. That said, retirement and preparation should be a positive experience. To get the most out of your future, it’s time to grab ahold of the reins and work with a qualified financial planner. Contact us at Invest Blue today for a stress-free retirement plan.
Thought we forgot the final tip?
6. Download our Paint Your Retirement Picture guide
If you would like to kickstart your retirement planning journey before working an adviser, download our retirement planning guide.
Paint Your Retirement Picture Guide
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.