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Are you ready for retirement? 3 questions to ask yourself

Getting ready to retire? If so, it’s not too late to make your retirement more comfortable. Remember, retirement should be when you do all the things you didn’t get the chance to do earlier in life – so you want to make sure you have enough money to enjoy it!

Take time now to do a financial stocktake and see how prepared you are for retirement. Consider asking yourself the following questions:

Ready for retirement

How much superannuation do I have?

Your super account will be a major source of income during your retirement. Ensure you reap the rewards of clever management and investment strategies.

If you are still working and have some money saved, you can start making voluntary pre-tax contributions. To fund the early years of your retirement, research the best short-term investments (such as cash investments or balanced investments). If you already have a lot of super saved, you may investigate slightly riskier, higher-yield investments.

No matter what you choose to invest your money in, keep in mind diversification of assets is a good tactic. It will ensure any poorly performing investments don’t affect your super balance too heavily.

How much superannuation do I need?

To answer this question, you need to ask yourself another: how do I want to live? A comfortable standard of living is a very subjective concept. The ASFA Retirement Standards estimate that to fund a ‘modest’ retirement a couple would need $34,855 a year. For a ‘comfortable’ lifestyle, you would need an income of around $59,971 a year.

For some, this may indeed contribute towards a good retirement. However, for others used to a higher disposable income, a yearly retirement income of $59,971 will not be enough. We suggest that you may need to think in the long-term. If you are planning on using your retirement to do all the things you’ve been putting off, you should consider taking extra steps to build your nest egg.

What age can I retire?

Generally you can start drawing on your super in some form when you hit the preservation age of 55. To find out when you are eligible, check out ASIC’s retirement calculator.

Even if you can retire, that doesn’t mean you should. It’s a simple equation; the longer you work, the more super you will have. A foolproof means of building a bigger nest egg is to put off your retirement for a few years.

However, this does not mean you have to put off enjoying your super. If you are over 55 and still working, you can set up a Transition to Retirement Pension. This will allow you to access the transition pension. You can continue to contribute to your super by setting up an accumulation account for your employer to pay into. Setting up a self-managed super fund (SMSF) will allow you to have both the pension and accumulation accounts in one Fund.

Working a few extra years before retirement will give you a few more comfortable years after it.

If you want to learn more about SMSFs, download an information pack today.

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