Preparing for retirement? Four things you need to know
It’s true that there are a lot more than four things you need to know when you prepare for retirement, but here are four that are important.
1. You need a plan
One of the worst things you can do is wait until you retire to work out what you’re going to do. From retirees I’ve talked to, without a plan of some kind, they are at a loss as to what to do.
One study of US retirees confirms this with the most successful retirees ranking planning “as far and away the most important trait for achieving a positive retirement.”
In reporting this in Retire Right, Frederick Fraunfelder and James Gilbaugh, Jr list six categories of planning:
- life with your mate
- personal and/or personal-growth goals
- sense of identity
- and leisure time.
That’s a good list. Retirement brings with it a period of adjustment (one retiree told me it took him five years to adjust—fortunately, that’s rare). Without a plan it can also be a time of uncertainty and frustration.
2. You take who you are into retirement
This is obvious. You are preparing for retirement at every stage of your life because you take you into retirement—your experience, your talents and skills, and your interests, and so on.
If you’re a foodie, that comes with you. If you’re into the arts, that’s there. If you’re a collector of whatever, that will most likely continue—probably with more passion.
But what if you’re grumpy? Do you want to take that into your retirement and become the grumpy old man/woman that people avoid? There are things we can work on that could bring greater joy to life.
Health is a good example of something to work on now for later. Good health is a huge asset at any time of life. If you’re healthy now you need to ask: How can I stay healthy? If you’re in poor health it’s: How can I be in the best health possible—so I can get the best out of my retirement?
Who do you want to be in retirement? The best way to do that is to start being that now.
3. Your money is important
Of course, money is important in retirement. Without it your lifestyle and what you do can be limited.
Australia has a three-tiered approach to retirement funding:
- Employers pay into super funds for employees
- You are encouraged to save or invest to add to the pot
- The pension is there as a safety net
Most retirees need the safety net to help them.
The system isn’t easy to understand, and unless you know how it works you won’t be able to take the best advantage of it. That’s when a good financial advisor can help you.
It’s important to know where you stand financially. The moneysmart.gov.au and its retirement tracker can help you work out what your income could be in retirement. It’s a rough guide. Again, unless you’re aware of the system and how it works, find someone who does to get the real figures.
While online, check how much money you need to live comfortably, here. That will also help you understand what is needed with your financial planning.
4. There is no one-size-fits all retirement
Each retirement needs to be custom made because you are custom made. For instance, if you find your greatest joy working in your garden, your retirement will probably be quite different to one who longs to be a grey nomad and on the road four months of the year.
Even a long-time married couple will have differences in their plans—with compromises necessary for each other.
You must create your own retirement. And that takes us back to the beginning.
Make sure there’s a plan in place—early.