Creating a retirement plan in Australia January 29th, 2023
A retirement plan is a crucial part of financial planning that will help you achieve financial stability and security in your golden years. Preparing one can be complicated because Australia’s retirement system, while effective, can also be a complex maze of options.
This is a high-level overview to creating a retirement plan in Australia. It’s not exhaustive by any means, and you should consider a financial advisor or signing up for our full Netplan Premium course to learn the process of creating a financial plan in more detail.
Get the job done
You should start by considering that your retirement goal should be to get the job done.
People's perception of what "getting the job done" may differ, but their intention is always to have a fulfilling retirement and life. Depending on how far your financial situation is from that achieving that lifestyle you will need to take on more, or less risk. Importantly though, the less risk you can take on, while achieving that lifestyle, the better.
Assess your current financial situation
Analyse your current expenses, debts, income, and assets. This will give you an idea of the income you will need to receive on an annual basis in order support your lifestyle. Bear in mind that typically, your lifestyle won't change that much in retirement. When you eventually reach the later years of your life, you might find that some of your costs start to reduce.
Your income and assets are the most influential elements to retirement in Australia because Centrelink uses the Income Test and the Asset Test to calculate the pension you can receive (and a variety of other benefits).
Determine your retirement goals
Consider what you want your retirement to look like, including your desired lifestyle, travel plans, and other expenses. Major life expenses like trips overseas, buying a new car, downsizing or improving your home will have an impact on your plan - and in some cases the timing of these expenses may impact your pension.
Maximise your other income and benefits
There are a variety of options for retirement income in Australia. Your superannuation fund is one example, however, your ability to receive a pension or part-pension should absolutely not be discounted.
There are a lot of benefits for Australians in retirement, and you should carefully investigate your ability to access them. For example, almost all Australians in retirement can make use of the Commonwealth Seniors Health Card, which gives you access to reduced cost medicines.
Finally, you don't necessarily need to stop working complete in retirement. You should consider whether it's possible to continue working in a part-time or casual capacity and asset its effect on the income test.
Minimise your tax
Reducing the amount of tax you pay on your retirement income is imperative to reducing your risk. If you can reduce your tax this could mean the difference between needing to earn $54,000 or needing to earn $75,000 a year. This means you require a lower rate of return on your investments and therefore you can avoid making riskier investment decisions.
Minimise the fees you pay
The fees you pay to maintain your investments can be very high and are simply lost money and often end up costing thousands a year. For many Australians it's important to look at the fees they are paying on their superannuation as they may get a nasty surprise.
Review and adjust your plan regularly
Your financial situation, goals, and retirement projections may change over time. Review your plan regularly to ensure that it remains relevant and realistic.
If you want to learn about these topics from one convenient, independent place, Netplan Premium is a full video course on creating a retirement plan in Australia. It costs less for a year's access than most initial consultations with an independent advisor.