Are you thinking about retirement?
Time for travel…new adventures…hobbies…fitness…friends and family…big lap around Australia.
Maybe you want to cut back on work for a little more time freedom.
Either way you can’t risk waiting until you retire to know if it’s possible or not.
You need to know before it’s too late to enjoy it…
Before your hips go…your knees go…struggle to get up the steps in your caravan and it seems too hard to do.
But when most think about retirement, it’s just the tip of the iceberg.
That was Barry and Jo. Retirement had been on their mind for a number of years. They just weren’t sure when.
They had been diligently saving towards their retirement. Investing in property and topping up their super where they could.
At this stage, they had been muddling along on their own…
But it was what was going on around them that made them realise they may run out of time to enjoy their retirement.
They were watching and seeing friends around them retiring.
Especially Barry’s group of golfing buddies. Sitting at work while his golfing buddies were hamming it up around the golf course.
So much so, Barry wanted to find time for another golf game through the week.
While Barry loved his work he was finding it less challenging as the years went by. It got them thinking, “Do we need to work anymore?”
The plan was to work till 66, but watching people around them retire. They were asking themselves whether it was possible to retire earlier.
We worked with Barry and Jo to figure out what their options were…
They’d been running assumptions on an excel spreadsheet. But it was the unknowns and assumptions that were worrying them. After all, an excel spreadsheet can only go so far.
It was figuring out their options that was the problem. The challenge for Barry & Jo was not knowing what was in store for the next 5 years and what they had to plan for.
Sure, they had a reasonable amount of assets. But how did that translate into providing enough income for their lifestyle and travel adventures?
Retirement Variables: One mistake and it might turn into a retirement nightmare
For Barry and Jo, the first 10-15 years of retirement was going to be the most expensive and most active. What we call the go-go years.
It was a time where they’d do most of their travel while fit and able to. The idea was to spend the winter in warmer climates. Either overseas or locally.
They both wanted more time for leisure and personal pursuits. Time they didn’t currently have.
They were realistic in their expectations that life would slow down a little after that. Called the slow-go years.
Their income requirements were going to be more in the first 15 years of retirement than later on. Therefore, careful planning was needed to take this into account.
But here’s the thing, there are many variables and assumptions you need to take into account when you are approaching retirement.
Most make assumptions about their expenses, investment returns, investment allocation, inflation and lifespan that are not always accurate. As a result it’s easy to end up with a retirement plan that is not feasible.
One wrong move and you’ll be experiencing a nightmare retirement before you know it.
Sure, you’re going to have to come up with some educated guesses. But don’t let your ego get in the way. Err on the side of caution.
Feasibility: Is Your Plan Feasible?
Abraham Lincoln once said “Give me six hours to chop down a tree, and I will spend the first four sharpening the axe”.
Many spend copious amounts of energy researching their share portfolios and which super fund to use. It’s the sexy stuff…
But it’s the boring stuff that will allow you to retire with confidence..
Before looking at what investments and super funds were best for Barry & Jo. We went to work on what options were in fact available to them.
We ended up coming up with three scenarios based on the discussions we had. Two they had mentioned and one we explored as an alternative.
#1 Cut back work to part-time and retire in 5 years time.
#2 Work full-time for the next 2 years and retire.
#3 Downsize and retire in 12 months time.
In our discussions, downsizing was on the cards to top up their retirement funding.
After looking at the feasibility, only two of the above options were attractive to Barry and Jo.
One of them put them in a position to retire and start their next chapter earlier.
Build the Retirement Puzzle…
I know it’s cliché, but building a solid retirement roadmap is a little like putting a puzzle together. There are many pieces that need to go in the right place to make it work.
It was no different for Barry and Jo…
Once we knew what was possible, the next step was to make their plan resilient.
Exploring all the risks and opportunities they could exploit to make their plan more resilient.
One of the biggest risk retirees face is “sequencing risk”. It’s the order in which your returns come.
The highest risk for pre-retirees and retirees is 5 years prior and 5 years post retirement.
For Barry and Jo, they were in a single investment within their super funds. To protect against sequencing risk, they needed to restructure their super investments.
Making sure that when the time came to take an income from their super. They were not forced to sell shares and property when markets went down. In other words it allowed their money time to do what it’s meant to do and last longer through retirement.
No Retirement Plan goes according to plan…
If the last few years are anything to go by, there’s one certainty…the future is uncertain.
We don’t know what’s coming next…
As we age our decision making abilities decline. When it comes to money and your retirement, you can’t afford to make bad decisions.
I don’t recall any retirement plans going according to plan.
Markets change, interest rates change, inflation, world events, health and your views change.
Successful retirement planning is about continual iteration. Reassessing where you’re at. The assumptions you are using. Pivoting when you need to.
Continually on the lookout for risks and opportunities to enhance your retirement plan and make it more resilient.
At times, you may have to reassess your plans and pivot. Other times you may be able to live a little more.
Achieving confidence and peace of mind about your retirement comes down to a robust plan. One that plans for the worst-case scenario, so you are not caught off guard in your golden years.
A financial planner who specialises in retirement planning can help you understand whether your retirement plan is feasible. Help you identify the risks and opportunities to improve your plan.
Not only that, they can help you take steps to improve the resilience of your retirement plan.
So if you are within 7 years of retirement, it’s time to take a closer look at your plan. Make sure that you are on track to achieve your retirement lifestyle and you have a solid and resilient plan in place.
With the right preparation, you can ensure your retirement years are comfortable and worry-free. Rather than full of stress and worry…
Don’t let misconceptions and unexpected events derail your retirement dreams.
Take control of your retirement by booking your Retirement Clarity Call here.
Glenn Doherty – CFP – Financial Planner | Retirement Planning Made Simple for aspiring grey nomads and avid travellers within 7 years of retirement