It’s not a time to start getting fancy. It’s time to focus on the steak, not the sizzle…
Building a solid foundation
If you are five years from retirement it’s time to start building a solid foundation. Time to take stock of where you are financially and assess how things could pan out. In other words, your personal game plan.
One which allows you to enjoy all the cool stuff. When you have more time freedom with the financial resources you have.
Your initial game plan will help you start to make the all important decisions to drive you forward. There’s no need for fancy charts and spreadsheets here.
You need to know how your plan will work. How you are going to replace your income when you stop working.
Your initial game plan will include all the specifics on how your plan is going to work.
This will help drive more confidence as you approach retirement.
Is your plan feasible?
Yes, you want to know your financial engine is going to safely see you through retirement.
The last thing you want is your financial engine blowing up in smoke part way through your retirement.
Start mapping out where your income will come from for the first five years of retirement.
It’s important to remain agile in your planning. We know you’ll experience challenges along the way and you’ll have to change your game plan.
External events will impact your plan.
Investment markets may not behave the way you expect.
Your dreams will change. Health issues unexpectedly pop up.
No different than a sporting team planning how they are going to play a game. It’s not until the game starts, they have to alter their plans as the game plays out.
Start dialling in your living expenses, recreation costs and luxuries you would like to experience in retirement.
Once you know these things you can start to dial in your feasibility or start your scenario planning.
The right tools
While you’re probably looking for some secret sauce here. There is no perfect tool to work this out.
What’s important is you find a tool and be consistent in using that tool. Whether it’s as simple as a spreadsheet or online calculator.
It does, however, need to allow you to be agile.
To be able to dial in your information, which can be used in a consistent way. Allowing you to be agile to make informed decisions.
Map out your retirement!
Now it’s time to think about what financial resources are going to be used to fund your retirement income.
You may want to initially look at the first 5 years of your retirement while some might look at the next 30 plus years.
This is as easy as setting up a simple spreadsheet and entering the income sources listed for the years of your retirement.
Where’s your income going to come from?
Superannuation and Investments? Rental income? Or, a part-time job?
Is it better to take lump sums from your super or move into an income stream and take a monthly payment?
Then below your income sources, map out your expenses for the first 5 years of your retirement.
List your annual living expenses for Yr 1, 2,3,4 etc.
Don’t forget to include line items such as holidays, purchase of caravans or replacement of cars.
Where is the money going to come from?
Do you need to start building up a buffer to pay for big capital expenses in the early years of retirement?
This will give you a great timeline to work with to determine your income and outflows. In at least the first few years of retirement.
You can now start to map out where the funds are going to come from to fund your yearly expenses.
This powerful mapping process.
Completed prior to retirement will give you the framework to make good decisions about how you will fund your lifestyle.
For example, you may have enough in your superannuation accounts to fund your annual living expenses. Withdrawing a prudent amount each year.
But, you have some other investments or cash which can be used for larger capital expenses such as overseas holidays or the purchase of a caravan.
This process allows you to organise ahead of time. To implement an optimal strategy for how you will fund your retirement income.
If you are able to dial this in prior to retirement, you’re going to have a lot more confidence about how you are going to pay for your life. Then you can look at how you can safeguard it prevent potential events from blowing your plan up.
Want to know whether you are on track for your desired retirement lifestyle? Maybe you want to know how to safely set your financial resources up for retirement? Schedule your complimentary Retirement Breakthrough Session on the button below.
Glenn Doherty – CFP – Retirement Planning Specialist | Retirement Planning for over 50’s couples and individuals | Founder of Jigsaw Private Wealth
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Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at March 2021. This is an online information blog. It does not imply an offering of securities.