We dream about the day that we can finally do all the things that we never had time for, from pursuing our hobbies, spending time with the family and jetting off on adventures – but how much are we doing now to guarantee a comfortable and happy retirement?
This is why pre-retirement planning is so important. Here are 5 simple steps that will help you work towards the retirement that you deserve.
Step 1: Conduct a pilot
Why wait till retirement to figure out whether you have saved enough to live comfortably? Trialling your retirement while still working will allow you to gauge whether you have enough income to support your retirement lifestyle. If you find that your lifestyle exceeds your income through this exercise, you will still be able to pivot from your original strategy and formulate a new plan to achieve a happy retirement.
Step 2: Plan for a long life
It is important to plan for a long life. Ideally, you want to ensure that your money outlives you and can be further utilised to support a dependent spouse and/or is inherited by your children. It is also important to take into account the different stages of your retirement, as your spending patterns in each of these stages can vary significantly. For example, it is likely that you will be more active in early retirement, while healthcare spending will likely increase in your latter years.
Step 3: Balance risk and return
One of the most important steps in planning for your retirement is a proper portfolio allocation that balances your returns with your preferred risk appetite. This is why planning ahead is so important – it allows you to build an asset base that is large enough to generate a reasonable return, while keeping you in line with your risk appetite. On the flipside, a smaller asset base would mean that you will be exposed to higher risks, as you will need a higher rate of return to sustain your lifestyle in retirement.
Step 4: Update your Estate
Your retirement planning is not complete unless you have your estate planning firmly in place. When planning for your retirement, it is important to ensure that aspects such as your will, beneficiary nominations and insurance is updated and in place, while also reviewing your assets and working towards settling your debts.
Step 5: Set up an action plan
Once you have completed the steps above and have a clear understanding of how much you will need in retirement, create an action plan to achieve these goals. The pilot will allow you to have a clear understanding of how much you will require in retirement, allowing you to assess the gap between where you are now and where you want to be. You can then create your action plan, taking into account potential options that include, but are not limited to, increasing your salary sacrifice, revisiting your assets, or even working longer.
Ultimately, a happy and comfortable retirement depends on the effort that you put in now, while you still have the option to make changes to get to where you want to be. While all this may sound like a lot of work, starting a conversation with a planner is a great place to begin.