Worried about how much you will need to retire? Five steps to increase your peace of mind

Published on: April 5th, 2023

Semi-retirees worry about money more than most. In fact, as many as 1 in 5 Australians worry on a daily basis that they won’t have enough to retire. And it’s completely understandable – it’s a time of incredible change. For many, it’s the first time in their adult lives they won’t be bringing in an income.

Adding to the worry is that how much you need is a deeply personal thing. As a guide, you can look to the ASFA Retirement Standard, which regularly publishes the costs of a modest and comfortable retirement. However, it’s important to understand that ‘modest’ and ‘comfortable’ are highly subjective terms.

During a recent retirement seminar, we asked the question ‘how much will you need to retire?’ and the answers ranged wildly from $500,000 to $5 million.

And it’s not surprising because it’s a difficult question to answer. At the end of the day, all of these responses could be correct. For some, a comfortable retirement is an annual caravan holiday and a Corolla; for others, it’s international business class travel and a Mercedes Benz.

The good news is that there are planning steps you can take to alleviate these common retirement concerns.

#1 Understand the lifestyle you want

Retirement means different things to different people, and understanding what you want from it will help you determine how much you need to fund it and plan accurately to put those worries to bed.

It’s essential at this stage to think about your values and what’s most important to you. Aligning your retirement plans with your values will ensure you can fund the things that will really add value.

I often tell people to think of it this way – what do you want people to say about you on your 80th birthday? It’s probably not that you drove a nice car, but it may be that you are generous to loved ones or well travelled. Whatever it may be, planning for a lifestyle that aligns with your values will ensure you can live your best life and use your money meaningfully in retirement.

#2 Structure your superannuation to weather storms

Potential market downturns are high on the list of worries for pre-retirees. And while they aren’t in your control, you can structure your superannuation to weather financial storms. This involves understanding your asset mix in detail to make calm, informed decisions, and exploring cash component options to utilise in market downturns. You can read more about this structure here and contact Apt Wealth to discuss.

#3 Make use of entitlements 

From changing superannuation and tax regulation to government entitlements, it’s essential to understand the landscape and leverage what is available to make the most of your money in the lead-up to retirement.

With the rising cost of living, several rebates and concessions are available to households, some means-tested and some not, so it’s worth exploring your eligibility and using any you are entitled to. These may vary state by state, be means-tested or have thresholds, but your Apt Adviser can help you navigate your entitlements.

#4 Explore ways to minimise tax and maximise income

While this is a good strategy at any life stage, in the years before retirement, it is a must to ensure you build sustainable income streams for retirement. It is an area where it is best to work with professionals, including a registered tax agent and a trusted financial adviser, to create a plan that aligns with your goals now and in retirement.

#5 Don’t forget the emotional transition

When thinking about retirement, it’s easy to get caught up thinking about the financial transition and forgetting that this is a massive lifestyle transition too. Before retirement, people often assume they will have 8 hours a day to themselves without work, and that nothing else will change.

But the reality is that most of us have spent decades in the workforce, and our careers and status at work have become part of who we are. So, it’s not just the time you would have spent at work that will change. It’s your network, it’s the people you relate to, it’s how you relate to them. All of this is tied up in your work life.

So planning for retirement must include a plan for how you will approach this transition too. You can’t take holidays all year, so it’s about considering the minutiae. What will you do every day?

How will you approach your changing status? For example, if leading others was part of your working identity, can you take on a leadership role in a social club or community group to build your network and maintain this identity as you retire?

Your Apt Adviser can help you plan for this transition too.

If you’re worried about how much you’ll need to retire, the key is to stop thinking and start planning. Giving yourself a roadmap will alleviate pressure and set you on a course to enjoy the retirement you deserve.

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.