Considering retirement in five years?
With your target retirement date approaching, it’s crucial to start taking steps towards retirement planning now!
Ideally, you want to position yourself for a smooth transition into retirement, ensuring that your golden years are truly golden!
Many people dream of retiring early and enjoying a life of leisure without the constraints of work. However, to make this dream a reality, careful planning and preparation are essential.
In this article, we will provide five tips to prepare for retirement in just five years. From financial considerations to lifestyle adjustments, these strategies will set you on the path to a comfortable and fulfilling retirement.
Financial planning for retirement: 5 tips to retire in 5 years
1. Work out a budget
To begin with, we suggest calculating your current net income and subtracting the amount you have saved over the past 12 months, as well as any debt repayments. This will provide you with the total amount you have spent in the last year on general living expenses.
Ask yourself, is this level of spending consistent with how you envision your retirement? Are there expenses that can be eliminated now or during retirement? Additionally, consider any potential additional expenses such as travel, dining, holidays, and other leisure activities that you may like to do during retirement. Once you’ve done this, this should give you a rough idea of the annual income you might like in retirement to meet your goals.
Another tip is to multiply your yearly expenses by 17 to determine the amount of assets needed to generate that income, adjusted for inflation over a 30-year period. This will give you a very rough goal for the amount of financial assets you will need to aim for but keep in mind that you also need to pay off any debts prior to retirement or add the debt amount to the target assets so you can pay any residual off at retirement.
Keep in mind that this calculation does not consider any potential government pension benefits, so your required multiplier may be significantly lower.
2. Map out a rough plan
If it surpasses 60, you will be able to access your super and won’t need to concern yourself with covering living expenses until that time. However, if you intend to retire before 60, it’s important to consider investments beyond superannuation.
Then it is a matter of putting a rough plan together on getting you from your current asset position to the asset position calculated in step one.
3. Maximising pre-tax super contributions
If you earn over $45,000 annually, it’s generally beneficial to maximise your pre-tax super contributions by using salary sacrifice or making tax-deductible super contributions. This strategy allows you to make the most of a great opportunity – for every $1 of gross earnings, you can put 85 cents into your super fund, rather then approx. 66 cents, or less, leftover if you don’t salary sacrifice.
Investing 85 cents per dollar in Super is a reliable way to secure strong returns. If your Super balance is under $500,000, you can tap into your unused contributions from the past five years using carry forward rules, potentially allowing you to make significant contributions with favourable tax treatment.
4. Work out what you’re going to do to keep yourself fit and healthy
When you lack work to occupy your mind and body, you may experience feelings of boredom and dissatisfaction. The absence of the structure and meaning that work provides can make you feel unfulfilled. It is crucial to have a list of activities or hobbies that you wish to pursue in retirement in order to maintain a sense of youthfulness.
5. Think about where you want to live in retirement
Optimising your retirement savings can be achieved by downsizing your home, and this doesn’t have to be a one-time event. You can initially downsize to a home that meets your needs at the beginning of retirement, and then consider downsizing again after 10 or 20 years to a property requiring less maintenance.
Various strategies can be employed for this purpose, but it’s entirely feasible to pursue both options. Since a significant portion of our wealth is invested in our family home, extracting some of that value at different points during retirement can certainly enhance your quality of life.
Retirement planning: 5 things to prepare for retirement in 5 years
Preparing for retirement in just five years requires careful planning and disciplined execution.
By prioritising financial factors such as optimising pre-tax superannuation contributions, long-term planning, and budgeting, people can establish a solid foundation for a secure retirement.
In addition to this, there are various approaches to consider, including lifestyle changes such as downsizing or placing emphasis on health and leisure activities, which are equally vital for reaching retirement objectives.
Exploring investment opportunities and seeking professional advice from experts like Precision Wealth Management can provide valuable insights and guidance.
With the right strategies in place, individuals can significantly improve their prospects for a secure and fulfilling retirement. Call Precision Wealth Management today to start your journey towards a better retirement.
DISCLAIMER – The information provided in this blog is general and does not consider your individual financial needs or objectives. It does not constitute personal advice. We recommend seeking out professional and independent financial, legal and tax advice which has been designed for your individual situation before acting on any information contained below.
Precision Wealth Management is a local, privately-owned financial planning firm based on Brisbane’s northside.
Our certified advisors work with each individual client to determine the best wealth creation strategy based on their unique situation.
We strive to stay at the forefront of the industry, and our investment approach is based on decades of research.
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Our services include Superannuation Advice And Planning, personal Insurance Advice, Budgeting And Cashflow Management, Investment Strategy And Advice, Aged Care Financial Advice, Retirement Planning Advice, and Debt Reduction Financial Planning.
At Precision Wealth Management, we offer flat fee pricing which is determined on the complexity of the work – not the value of your investments.