Navigating your first year of retirement
While the prospect of retirement is exciting for most, the changes it brings can be a shock. In the previous edition of Inform, we examined what you should do to prepare for the 12 months leading up to retirement. In this edition, we share tips that can help, or a family member approaching or already in their first year of retirement, adjust to your new freedom and financial position.
Even if you’ve carefully mapped out a retirement plan, as per our suggestions in last month’s Inform article, ‘12 months and counting’, the reality of the first year of retirement can leave you feeling completely unprepared. Here is some advice on how to successfully put your plan into practice.
ONE: Resist the temptation to do everything at once
When people first leave their jobs, they often feel pressure to fill every minute of their day with new projects or grand travel plans. But there’s no reason to rush. The beauty of retirement is that you have the time and the freedom to enjoy it in any way, or at any pace, you like. As gerontologist Professor Lynne Parkinson commented in our previous article, new retirees shouldn’t feel pressured to do anything they aren’t comfortable with. As well as pursuing interests or activities that suit your personality, you need to keep your long-term financial plan in mind, as taking on too much at once could see you eat through your savings.
Making lifestyle plans often requires a huge adjustment given that people who retire at 65 can often expect to live at least 20 to 25 more years. To ensure you stay active and engaged, without the risk of you or your finances burning out, think about spreading out your activities and travel plans over a number of years.
TWO: Track your spending
Many people, regardless of their wealth status, might have trouble keeping track of where every dollar goes. Your financial adviser can provide a clear spending plan in advance of retirement which factors in assets such as a house, savings, investments, superannuation and any pensions. The plan should also account for everyday budget items that can quickly rise in price, such as petrol and power. When it comes to budgets, a common error is to underestimate or forget the significant payments that may spring up, such as house repairs, a new car or a kitchen renovation. These unplanned costs can be sizeable and can emerge at any time.
A multitude of online tools can also help you track and plan your spending and investments, from checking bank statements, updating budgets to calculating future aged care costs. Some examples include Commonwealth Bank’s Budget Planner, ASIC’s MoneySmart and CommSec’s app.
While your financial adviser is on hand to help you monitor and adjust your financial plan where necessary, it’s worth taking advantage of these handy tools.
THREE: Communicate with all family members
The early phase of retirement can be a period of adjustment for all family members – not just the retirees. Consider sitting down with your children and any other relevant family members to outline your retirement blueprint, including things such as travel plans, taking up new activities such as yoga, photography, bowls and golf, or starting a project such as volunteering or a community group role. This helps the younger family members understand and support the changes their parents are going through.
FOUR: Play it smart when planning a special trip
If your dream is to travel, it doesn’t have to ruin the budget. Make smart choices. Some of them might be obvious,
but they make a big difference. Avoiding peak seasons in prime domestic or international destinations can often save
thousands of dollars. Keep an eye out, too, for airline and accommodation discounts, and consider cheaper options such as accommodation through holiday house rental websites. It may also be possible to utilise the equity in your property, so you don’t have to draw down from your superannuation fund. As Parkinson commented in our previous article, for most people “happiness in retirement comes from staying active, which itself comes from having a plan. Going home and staying home never made anybody happy”.
FIVE: Keep growing your wealth – and check in with your financial adviser
Your financial adviser can help you to continue to build your retirement nest egg rather than simply letting it gradually whittle down. Longer life spans mean retirees can continue to benefit from investing in assets such as shares and property that typically grow over time. It is important, though, to discuss with your financial adviser the advantages and disadvantages of such investments.
Whether it’s increasing your retirement income, restructuring assets and investments, understanding aged care costs, getting advice on pension drawdown, or even estate planning, a financial adviser has the expertise to help.
Factoring in these five tips is your first step to a smooth first year of retirement. They allow you to relax and enjoy this wonderful new phase of your life, knowing that you have your financial future under control.
Retirement offers a world of opportunities. Speak to your financial adviser about developing or updating your financial plan so that it gives you the freedom to explore your passions and interests.
For advice specific to your situation, please contact our office on 07 4151 8898.