When Should I Retire?

when-should-i-retireDeciding when to retire is one of the most important decisions you will ever make as an adult. Retiring too early can leave you stressed and struggling through what should be the most relaxing, enjoyable days of your life. Retire too late and you could find yourself with more money, but with limited time to enjoy the fruits of all your hard work. There is no universal answer to this question and making the right choice about optimum retirement age is personal. Ask yourself the following questions to make an informed decision that’s right for you.

1 How do I imagine my retired life?

What do you see yourself doing when you eventually retire? Do you aim to live comfortably but sensibly or are you looking for luxury with several holidays a year, pursuing your favourite hobbies and enjoying lots of meals and trips out?  You want to be happy and relaxed in your golden years, not stressed and restricted money-wise, so it is extremely important that you provide for any luxury expenses in your calculations that will make your retirement worth the wait. Being realistic about the costs of the things you enjoy is crucial to ensure you get the best out of your retired life doing what makes you happy.

2 Do I want to leave anything for family?

This is a very personal decision that depends on your personality and family relationships. Do you intend to keep aside some inheritance for your children and grandchildren or are you more concerned with getting the most out of your well-earned retired life? There is no shame in either position, some people feel their children are grown-up enough to have control over their own finances without relying on their parents but others prefer to know that their family members will be taken care of financially when they eventually pass. Be sure to plan accordingly if you wish to leave your kids and grandkids a nest-egg.

3 Will I have any other income when I retire?

Some people yearn for their retirement all their working life but when it finally arrives, they find themselves bored and unstimulated. If you see yourself as the kind of person to tire easily of the endless freedom and emptiness of a life without work, you could choose to take up a part-time or weekend job. This will keep your mind and body active, keep you social and give you purpose, as well as bring a steady flow of income to your household. This extra money will give your finances a big boost and give you a much more comfortable retired lifestyle.

4 What about my debts?

It is essential that you make allowances in your calculations for any loan repayments, credit cards and other debts you may have left to pay. In today’s society almost half of retired people have housing repayments still outstanding and so you need to budget for these future outgoings where necessary to avoid landing yourself with a restricted retirement in the future.

5 How long will I live?

A morbid question indeed but being realistic about your life expectancy is important. If you suffer from illness or have relatives that lived very long lives then be sure to take these factors into consideration in your retirement plans.

The ASFA Retirement Standard is a study that sets out the costs of an average lifestyle in dollars and can give us a pretty accurate estimation of living costs which makes for a good starting point for your calculations. The study shows that a single Australian homeowner, after tax, retiring at 65 and living until 85 needs about $21, 946 per year after tax to fund a modest lifestyle. To enjoy a comfortable lifestyle you will need an annual income of $40, 297. Therefore to enjoy a retirement with money for recreation, travel and private healthcare you will need a lump sum of $524, 000 to generate the necessary annual income.

Having thoroughly researched the costs of your desired retirement lifestyle, the effects of any debt you may have, any money you wish to give to family and whether or not you will have any extra income when you retire you finally need to work out the final figures and calculate the necessary money in superannuation to fund your dream retirement. The simplest way to do this is to take advantage of your bank’s online superannuation calculator that will do all the maths for you.

When you have established your target annual income it is recommended that you sit down and discuss your options with a financial adviser who can help and guide you to achieving your perfect retirement. Seeking expert advice is highly recommended.

The information in this article does not constitute legal or financial advice. If you would like to discuss any of the above in greater detail, please contact your usual Axis adviser.