Episode 48 – The New Retirement Mentality


In this episode we look a the changing landscape of retirement and why we should be planning earlier than ever and putting plans in place so that we can achieve our retirement goals. 
Retirement has changed. Decades ago the average retirement age was 65 and the average life expectancy was 63, meaning that a majority of people would not ever reach retirement. Now rather than seeing retirement as a time that we’re stopping work and starting doing ‘nothing’, people are looking at retirement through a different lens, as though they are beginning a new part of their life. 
The facts are that this new found excitement that we will be spending many years in retirement means that we have to find a mechanism in which to fund it and we need to start planning this earlier than ever to make sure we can achieve and fund the lifestyle that we desire. 
Our tips of things to look at as you head into retirement:
  • Downsizer Contribution
    • If you’re part of the 25% of retirees who change home when they move into retirement then you need to be aware of the fairly new downsizer contribution rule. This means that when you go to sell a principle place of residence you may be able to get money into super where you mightn’t have been able to before. You can do up to $300,000 per person, meaning a couple could potentially get $600,000 into super. The best part is you don’t actually have to downsize, you could buy a more expensive home if you wanted to and still use it. 
  • Know your contributions
    • Following on from the downsizer contribution it’s important that you’re aware of all the different types of super contributions that are available to you and which ones are suitable for your personal situation as you head towards retirement. One thing to be aware of in the years coming is the new catch up concessional contribution rules. This will let you use any unused concessional contribution cap amounts from previous years starting this year and could potentially be a good way to get money into super as you near retirement and save on tax. 
  • Visualising – know your number
    • To be able to plan for retirement you need to have an idea of what you’re planning towards. Retirement looks different for everyone and therefore the amount you need in retirement is different for everyone. Sitting down and planning out what you want to do in retirement and then understanding how much that will cost you each year gives you a good idea of the amount of capital you need to work towards achieving before you get there. 
  • Retirement isn’t all super
    • Whilst super will probably make up a large part of your retirement funds it’s important to make sure it’s not your sole focus, especially if you are wanting to retire before you’ll be able to gain access to your super. Looking at different ways of accruing wealth outside of super is vital if one of your goals is to retire early. More and more people are looking to access equity in the family home in retirement as well and people could potentially look at this 
  • Sequencing risk
    • Sequencing risk has a big chance to adversely affect your ability to fund your lifestyle long into retirement and therefore you need to have a plan in place to try to avoid sequencing risk to the best of your ability. As you get closer towards retirement you may want to look at your asset allocation to make sure you wouldn’t be too exposed if something like a downturn was to happen as that could potentially wipe out a large portion of your capital that you were planning to use to fund your retirement. 
  • Asset allocation
    • Structuring your portfolio correctly will be a big determinant in making sure you reach the finish line. Traditional ways that people used to treat a retirement portfolio was to make them super defensive however the problem with that is that whilst interest rates are at record lows, how do you get a return that covers cost of living?  As people are living longer and whilst we are in the interest rate environment that we are in it becomes important that we have some allocation to growth assets that will allow us to get potential returns above the rate of inflation and then some so that we can continue to live the life we want to into retirement. 

Wealth Collective trading as Pekada (ABN 95 624 612 684), corporate authorised representative (CAR), number 1263725, is authorised to provide financial services on behalf of Communitas Wealth Pty Ltd.

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