Retirement is packed with choices: Here’s how to start

Retirement is a funny time of life. Some people can’t wait for it, while others push it to the back of their minds, thinking they’ll plan for it later.

Until recently, many people didn’t give it much thought until they suddenly realised they wanted their retirement to be different from previous generations. They wanted it to be epic – and that takes some preparation.

Retirement means changing your whole life, so it’s important to plan ahead.Credit: Getty

Every year, about 120,000 people retire in Australia, and that number will grow as the last of the Baby Boomers decide that they want to stop working. But how do you prepare for it?

Despite what some might claim, you can’t just walk into a financial adviser’s office and expect them to “plan your retirement for you”. There’s a lot more to it. Modern retirement is packed with choices, many of which you’ve never had to navigate before.

Think about it: almost everything in your life changes during retirement. What you do with your time, where your money comes from, how you spend it, where you find fulfilment, and where you find a sense of belonging.

With so much change, it’s surprising that most conversations still only focus on financial planning. Meanwhile, your body is changing, and you have to make important choices about how to manage and proactively support that as you age.

So, where do you start?

Preparing for retirement isn’t just about saving enough money—it’s about envisioning the life you want.

First, build a vision of what your life ahead might look like. Now, I hate to get all woo-woo on you, but this step is crucial, and depending on your age when you start planning, this can be quite challenging.

If you start at 40, you might not know many retired people, so you’ll have to imagine the lifestyle you want and the values you want to live by. If you’re in your 60s, you probably know many people who are already retired, and they might be lobbying you to join their “club”. The real challenge then is to define what retirement means to you – because it isn’t the same for everyone.

Next, set yourself some goals. Goals are something people often talk about, but many people approaching retirement don’t really know what they mean or how to set them.

Simply put, a goal is a deviation from the path that life would naturally take. If you want your life to be different from what would have happened anyway, you need to set goals to achieve that. These goals can be simple or a real push, but they should reflect what you truly want from your retirement.

Once you have a vision and goals, start thinking about how much that will cost annually. You need to understand your projected cost of living: what will it take to maintain your basic standard of living, and how much will you need to enjoy life a little every year?

On top of that, what will you need to cover your goals and one-off expenses such as renovations, new cars, or health-related spending?

Next, take a good look at your big financial picture. What are your assets, liabilities, superannuation and, investments, and how much capital is tied in your family home?

When considering retiring, you need to get a clear sense of where you stand before making any big moves.Credit: Louie Douvis

Resist the urge to dive into strategy just yet – you need to get a clear sense of where you stand before making any big moves. Many people start to tweak their asset allocations when they’re thinking about retirement, but they often forget to consider the bigger picture: your income goals for the future.

For instance, if you’re planning to rely on the age pension, selling the family home and unlocking capital might affect your eligibility, as it could push you over the assets test threshold and reduce your income.

On the other hand, if you’re self-funding your retirement, downsizing could be a smart move to boost your financial pool.

Map out the different stages of your part-time and full-time retirement and start thinking about your income sources in each. Most people today don’t retire completely unless they have to.

Instead, they gradually transition through a few stages before reaching full retirement. Each stage will require you to recalibrate your income sources and adjust your way of life.

You’ll need to consider how much money you’ll need from passive income sources, how much you might continue earning from part-time or casual work, and when you’ll be ready to fully rely on your retirement income streams. You’ll also want to think about how it changes your lifestyle.

Then finally, it’s time to start working on your investment strategy – and how you turn your assets into the income streams you need. This is a great time to get some financial advice, lay out your vision, goals and big financial picture and get some help getting there – or adjust things if your plans need to be more realistic.

Preparing for retirement isn’t just about saving enough money. It’s about envisioning the life you want and then taking the steps to make it happen. Only you can make it epic.

Bec Wilson is the author of bestseller How to Have an Epic Retirement. She writes a weekly newsletter at epicretirement.net and is the host of the Prime Time podcast.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.

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