Retirement is a big deal! It's a major life event that requires serious planning. And ideally that starts long before you’re ready to retire. Fundamentally, you need to make sure you have enough dough to bake bread in your golden years.
But where do you start? With retirement planning, there are so many things to think about! We'll walk you through it, starting with the top questions to ask your financial advisor before retirement.
It's important to dream about the amazing things you want to do in retirement before meeting with a financial advisor. Think about your desired lifestyle. Do you want to travel the world, travel Australia in a caravan or live a quieter life? Will you buy that yacht or be content with a daily beach walk? As well as the big-ticket items, try to forecast what your long-term care needs might be. And think about potential family support payments, like helping your children buy a house and spoiling your grandkids (or paying their school fees).
Once you’ve pondered all of this, chat with your advisor to go deeper and discuss your current financial situation, such as income, expenses, assets and debt. By doing this, you'll have a solid starting point to have meaningful conversations and create a clear roadmap to a happy retirement.
Ask Your Financial Advisor These Questions In The Retirement Planning Process
1. How can I best plan for a comfortable retirement?
This question is the jumping-off point with your advisor and it feeds into the points above regarding understanding your desired lifestyle, income requirements and capital required to facilitate what a comfortable retirement looks like for you. A thorough examination during this phase will provide the assurance that the timing of your retirement decision is well thought out and considered.
2. What are my options for withdrawing money from my superannuation retirement accounts?
Once you’re over 60 and in retirement, or over 65, you’re in the superannuation pension phase. There’s no maximum amount you can withdraw each year but there are minimums depending on your age. For a 65-year-old in the pension phase, the minimum is 5% of the pension balance (currently halved to 2.5% in the 2022-2023 financial year which may revert back from 1 July 2023). For example, if your pension balance is $1m, then in an ordinary year with the general minimum imposed $50,000 must be withdrawn in that year. Note, this percentage relates to only the pension balance and not the overall super fund balance.
3. How can I create an income stream that will last the duration of my retirement?
This is a big one. Through careful planning, preparation and confirmation of lifestyle goals in retirement, a sufficient capital base to provide that income can be determined. The best way to create this income stream is to plan ahead, maybe 10 years out, and work towards that date. That will involve maximising superannuation contributions over a sustained period, careful budgeting, investing in the right assets that will grow over time, and sticking to your planned retirement lifestyle when the time comes to start drawing on that income.
4. How can I protect my assets from market fluctuations and economic downturns?
Depending on the size of your asset base and required income that's drawn from it, protecting the value is something that should be considered. Investing in companies that are well established, have defensive earnings streams and pay high dividend yields tends to lead to less overall volatility in a portfolio during market fluctuations. Avoid companies that aren’t yet profitable or that have a falling dividend.
Economic downturns usually lead to falls in share markets, so implementing a long-term view can get you through these short down periods as markets do recover. As long as the income you’re receiving stays relatively stable, overall you’ll come out ahead over the long term.
If you're getting ready for retirement and moving cash into the market, maybe after selling a property or a business, ask your advisor about dollar cost averaging (DCA). It's an investment strategy where you invest a set amount of money on a regular basis, no matter how the market is doing. Basically, it helps reduce the impacts of market volatility on your investments.
5. How can I minimise taxes on my retirement income?
Another big question with lots of moving parts. The answer will be unique to your situation, but here’s some key points to note.
- Consider investing in stocks with franking credits to reduce taxable income
- Get tax advice from your accountant on the best place to hold assets long-term, such as in a suitable entity (e.g. super, trust, or company)
- Consider utilising superannuation in pension phase for 0% tax on withdrawals and earnings
- Look into the advantages of 0% CGT by buying assets in superannuation in the accumulation phase and selling in the pension phase.
That last one could be a game changer when you imagine buying property within a SMSF and selling it in the pension phase with 0% CGT. Of course, most of this requires professional financial advice from a skilled SMSF accountant.
Plan For Retirement With BlueRock
If you’re ready to set some serious wealth goals and plan for retirement, we can help you get there. To get started on this wealth adventure to early retirement, get in touch with our financial advisors and investment experts today.
Disclaimer: The information in this article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.
