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Put the stepping stones to retirement firmly in place

Wealth

Put the stepping stones to retirement firmly in place

HELEN BAKER offers her five money foundations you need before retiring.

Retirement is your time to enjoy life to its fullest and tick items off your bucket list.

However, without good foundations in place, that dream voyage could become an unpleasant slog up a proverbial creek.

Having worked hard all your life, the last thing you want – or deserve – is to board the retirement ship, only to discover it’s riddled with worrisome leaks, unfavourable cargo or is sailing  in the opposite direction from your  dream destination.

Before calling time on your working life, use this simple checklist to lay the foundations for a happy and prosperous retirement journey.

  1. Tax planning: paying too much tax is generally an avoidable mistake with some diligent preparation.

Consider, for instance, the different tax rates applied to investments you own personally versus those owned by your superannuation, company or family trust. Optimise ownership to minimise tax. Selling investments to top up your super may attract capital gains tax. Or you could enjoy certain benefits for making additional contributions now.

Then there are your beneficiaries: you could unwittingly leave your family worse off if your will is incomplete or poorly structured, or if assets are  distributed unwisely.

  1. Appropriate structures: retirement opportunities to stretch your money further will depend on structure and age.

For example, superannuation versus pensions: you may even be eligible for a part-pension, helping to conserve your super. Your spouse or partner may qualify for Centrelink benefits even if you don’t.

Even home ownership should be scrutinised. If you don’t own your own home, can you get into the market while still in paid work? Can your current home accommodate your needs as you get older? Will downsizing allow you to unlock additional funds? Is an expensive relocation on the cards? Are you and your partner joint tenants or tenants  in common?

  1. Adequate protections: without employment to generate income once you’re retired, super and investments are your means of keeping food on the table. Protecting them is paramount.
  • Review insurances. Some cover – life, total permanent disability and private health – becomes even more important with age, yet harder to obtain. Others, including professional indemnity, may no longer be needed.
  • Revisit asset protections to maintain sufficient coverage – both for repairs/replacement and associated losses. Does your home insurance offer temporary accommodation should your home be damaged? Rental car cover should your vehicle be stolen? Can you meet upkeep costs on an investment property if it is untenanted?
  • Devise back-up plans. How will you respond if markets fall, wiping out super or other investments? How is your money invested to cater for access while still allowing growth and income? What is your emergency fund like?
  1. Expense forecasts: consider how you will be spending your days in retirement, because your newfound freedom and what you do with it will directly impact your spending habits. Sure, you may save on commuting to the office or having work clothes dry cleaned.

Conversely, though, more time at home will mean higher energy costs and no more work-funded meals. Plus, you may want to travel, start new hobbies or get more active in existing ones – all of which will have additional costs. Spoiling your grandkids doesn’t come cheap. Even volunteering your time may hit your hip pocket (such as non-refundable travel and administration).

  1. A coordinated plan: a well-considered and coordinated savings and investment plan is the key to smooth sailing in retirement (as, in fact, for any stage of life).

Ensure that your left hand and right hand are talking to each other – that is, you know how your various income sources and protections (super, will, company, trusts, savings, investments, insurances, tax etc) align with one another. Factor in your partner: will they still be working once you retire? Do you both have enough super to contribute effectively?

 Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: The Essential Guide to Financial Independence for all Women. Find out more at onyourowntwofeet.com.au

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