The 1-5 of Planning Your Retirement

1 December 2010

The 1-5 of Planning Your Retirement

Thinking about retirement, dreaming about retirement. I am sure most people just think about the freedom of going fishing whenever you like, playing golf 5 days a week or just taking advantage of those last minute cheap flights and hotel deals and know whenever they come up you can go.

However when the day finally comes there is much more to it. Apart from the financial side – where will my income come from? You have 5 days a week and extra 40 hours each week to fill in. For some people this is no problem, for others if they have no real hobbies or clubs in their working life, this can be. In the first year of retirement most of this surplus time gets taken up, but with things that cost money. Home renovations, holidays, travel etc.

So how does one prepare, plan so they know what to expect mentally and financially. First it’s answering some hard questions;

1)      How much do you spend today (2010) to live? Excluding loan payments and kids expenses (if applicable).

If you don’t know find out. Do a budget today……..  Budget Planner – Excel Worksheet

When I ask people this question it can vary greatly. However the average can be stated at $1000 per week. I average this up again to $60,000 per year. This is for 2010.

If you want to retire in future years, 2020 etc, then this must be indexed to CPI.

2)      So now you have the minimum cost of living from year to year. Now think about when you retire what are the first few things you might want to do?

  • Clear all personal debts. I say personal as if you have investment debts it may be prudent to retain these but you will need to seek advice.
  • Buy /update car.
  • Finish off the home renovations.
  • Buy the toys – Boat/ Caravan/ Winnebago.
  • Go on an overseas holiday.


3)      Update your WILL. Well why not you are now old. This is actually quite serious. You have a choice to have a SKI retirement or have a Legacy retirement! When we provide retirement advice and undertake a full analysis we will calculate this scenario in and it will change the capital you will require for your retirement.

SKI – Spend the kid’s inheritance. This means take your money with you. Enjoy it, after all you made it so you can spend it and enjoy your life. Your estate may receive your own home and that’s it. The rest has been spent on fishing gear and massages on the cruise ship.

 Legacy – This is where you leave your investment and retirement wealth to your estate. This does need to be planned and does make a difference to your capital needs in retirement. You also need to either understand what the tax implications are for your estate and beneficiaries. There may be some strategies you can undertake to reduce.

 There is also much more to consider when preparing a WILL and planning for your estate. If there are beneficiaries who are disabled or have special needs/ marital issues / estrangements / drug dependants or family squabbles. Please see your adviser, who can assist you in planning for these things or see your solicitor.

4)      So now the million dollar question….. WHEN?

For some this is easy to pick, for others as soon as financially possible. For those lucky few who enjoy their work it’s in the never never, there are those in business, self employed who have a very small exit strategy.

All I can suggest is to nominate a date in the future and plan for this. Make it conservative (shorter rather than longer from today).

NOTE: Also planning 10 years or plus out should be the latest you start. Analysing or planning for retirement with less than 10 years can be very difficult or risky. The main investment market cycles are a 5-7 year cycle between peak to peak. If you get this wrong you need time to recover. So 10 years should be a minimum.

5)      Free Time. Start to think about hobbies and what you will be doing while you are not at work. Remembering that have a 365 day a year holiday will increase what you actually spend compared to today. Consider volunteering for charities or sporting clubs.

What many retiree’s do is go back to work for pleasure. Part time and casual work can be socially rewarding as well as provide essential beer or travel money. Some even work for cash, which we discourage J.

  • We now have a date…e.g. 2020.
  • We have the annual income you will require….. $60,000 pa (present dollar value (2010)).
  • You want to be debt free and have enough money to upgrade 1 car/ buy and caravan / have a 4 month world holiday in the first year and then a smaller annual holiday thereafter.
  • You want to leave a legacy, leave all your investment assets to your estate.

We can now fairly accurately calculate how much you will need in 2020 to achieve all of these things!

Great you will need $2,500,000 in investment capital and $250,000 cash available.


Find our next year in Part 2 of  ‘The 1-5 of  Planning your Retirement’

Analysing your potential to achieve this

  • Identifying the financial GAP.
  • Finding the strategy to meet this GAP.
  • Establishing this strategy and reviewing it.

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