Retirement financial planning is about preparing a client for retirement. Planning for retirement involves several considerations, such as asset projections, government pension considerations and estate planning.
Super and Pension Planning
Commonly when people think retirement planning they think about their super. While super is extremely important in accumulating assets for retirement, it is just the beginning of the retirement planning process. For example, a pension must be established to draw down funds from the asset base that has been accumulated in a super fund. (A pension should not be confused with the Government Age Pension)
There are other important considerations as well. For example, the assets you have invested in throughout your working life may no longer be suitable for you as you approach retirement. Shares, for example, tend to generate a higher return over the long term, but can be extremely volatile in the short and medium term.
That is why it is important to review the assets you hold as you get closer to retirement – no one wants to see a sharp decline in their asset base just before they retire!
The Government Age Pension
All retirement plans should consider the likelihood of receiving the Government Age Pension. While debate continues over how the country should fund the age pension, retirees entitled to the age pension should not be afraid to apply for it.
There are many myths that surround the age pension, such as;
- If I own my home I can’t get the age pension
- I have to have a very small number of assets to receive the age pension
- The government will constantly harass me for financial information
The above are all misconceptions. In fact, the government is very clear on how a retiree can arrange their assets to improve their chances of receiving the age pension. Further, the age pension assets tests are divided into home owners and non-home owners and allow for quite modest asset holdings that often surprise clients when they are told.
Future Projections
This is probably the most important piece of the retirement planning puzzle.
Understanding where they will sit financially in many years is something many clients are ill equipped to identify themselves. There are so many variables that something as simple as an excel calculator can hardly be sufficient in projecting assets and cashflows 10,20 and 30 years into the future.
The power of projections allows for clients and their adviser to identify future issues as well as opportunities to improve their financial position.
This might include;
- Identifying cashflow shortfalls
- Identifying when asset values are zero
- Determining potential estate issues and addressing future tax liabilities, before they arise
- Looking at worst case/best case scenarios to ensure external forces do not derail retirement plans
Who needs Retirement Financial Planning?
Retirement planning is extremely beneficial for those who want to take control of their financial future in retirement. Retirement planning is predominantly about bringing certainty into a client’s life. It is about showing them whether they are on track to meet their goals in retirement.
For those who do not have explicit goals it can be beneficial in speaking with an adviser, just to start the retirement conversation.
Often, earlier is preferable to later. With more time to implement advice, strategies can be more effective and less resources are needed.
What are the Benefits?
The benefit of retirement planning is an improved financial position throughout retirement. But this is often not the only benefit associated with taking retirement advice.
Many clients gain a sense of clarity and comfort from knowing what their future looks like.
Addressing the financial side of retirement ensures clients can enjoy their retirement. They know the lifestyle they can afford today and they know how long it will last.
Want to know more?
If you would like to read about our advice services for pre-retirees, click here.
Otherwise feel free to contact us and organise a time to interview one of our advisers.
Disclaimer: Any advice provided in this document is General Advice Only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. If any products are detailed on this document, you should obtain a Product Disclosure Statement relating to the products and consider its contents before making any decisions. While all care has been taken in the preparation of this newsletter, The FinancialLink Group Pty Ltd does not warrant or represent that the information is accurate, complete or current.
