The decision to retire either through the sale of a business or stepping down from a career brings about a new set of challenges. There is a level of uncertainty due to the shift from salary/business income funding your lifestyle to being reliant on your investment/superannuation assets. Typically you find yourself asking questions such as:
- How much can I afford to spend every year?
- How long will my money last?
- Can we afford to gift/loan some money to our kid’s or grandkids?
Before retirement, these decisions don’t take as much thought because you could always work a little longer. On top of the financial questions, you also need to think about how you want to spend your time? Travel, volunteering, learning, health and fitness. Looking after both your physical and mental wellbeing as you get older is as important as making sure you have enough money.
Post retirement we typically see three phases of lifestyle being active (hobbies, family, travel), passive (less travel, possible downsizing) and frail (less mobile, health). The financial requirements for each phase will vary.
Those few years either leading into and after the ‘retirement date’ are critical from a planning and returns point of view. In structuring your strategy, it’s important to ensure that you remain in control of your lifestyle decisions. Take too much risk and factors beyond your control such as global economic conditions could dictate they way you live.
There are a number of planning strategies that can be used to achieve retirement goals and provide peace of mind. An example would be using an income stream to fund your basic living needs and investing in growth assets to fund wants. Exploring the alternatives and deciding which is appropriate for you is the key.