The start of a year can often be a time to think ahead and decide on your future plans, even if it’s only in outline form.
One thought that may have entered your mind is to make 2024 the year you finally give up working and start to enjoy your well-earned retirement.
The idea of your time being yours, with total control over what you do and don’t do, can certainly be an attractive proposition. You probably won’t miss the daily commute either!
Maybe you have always had 2024 in mind as your retirement year. Perhaps you have reached a certain age, or there’s another family landmark such as children finishing college or university that now makes it feasible.
Alternatively, it may be a spur-of-the-moment decision based on a gut feeling, or you have reached the end of your tether with work and the associated stresses.
Regardless of the reasons, it’s important to realise that a successful retirement is something you need to plan for. Here are a few key steps that can help you do so.
Have a good idea of what you want to do once you stop working
Retiring will commonly mean that all your time is your own – subject, of course, to any family commitments you may have.
However, while breaking free from the daily routines associated with work can appear to be an attractive proposition in principle, in reality it can create problems for you if you approach retirement without a plan.
From a simple health perspective, research reported by Morningstar raises the concept of “retirement risk,” where retiring without any plans to stay physically active can boost the risk of heart disease and other medical conditions by 40%.
The same article also points out that the transition from work to retirement can actually be stressful, when logic would dictate that the reverse should be true.
As a result, it’s worth planning for your retirement to be as fulfilling as possible in order to avoid falling into a sedentary lifestyle.
However, you also need to ensure that you can afford whatever you have planned.
So, rather than simply jumping into retirement without a thought, it’s worth taking some time out to consider your plans. You may actually end up thinking that you’re still happy working in some capacity.
Work out how much income you need
What you’re planning to do will give you a decent steer in terms of how much income you’ll need.
It’s best not to automatically assume you’ll be spending less. While you’re working, it’s likely most of your discretionary spending is at weekends. Once you stop working, your weekends will effectively last for seven days each week!
As you prepare and start planning ahead, it’s a good idea to make a budget. When doing this, it can help to break down your potential future spending into two categories:
- Your essential expenditure – This covers your basic living costs, including expenses for meals, home cooling, utility bills, and day-to-day travel.
- Discretionary spending – This is effectively the money you’ll spend on your retirement plan, as well as other regular outgoings on things like eating out, holidays, and leisure.
With a good idea of your spending needs in retirement, you’ll be able to work out the income you’re likely to need.
You need to ascertain your sources of retirement income
With an idea of how much income you’ll need to fund your lifestyle of choice, you will then need to work through your various financial assets and get an idea of how much income they will provide you with.
The sooner you know this the better, so if you’re thinking of retiring in 2024 it should be high on your priority list.
Likely sources of income and lump sums for one-off purchases could include:
- Your accrued retirement funds, including your super, plus any retained pension assets in the UK if you have any. You can use the Pension Tracing Service website to find any UK pension funds you may have lost track of.
- Any UK State Pension you may be entitled to. You can check on the UK government website to see how much you can expect to receive.
- Other savings and investments you’ve accrued.
- Funds that you may access from residential property, both downsizing here in Australia and the sale of any retained property in the UK.
- Income from any rental property.
- The sale of any business you may own.
With all that information to hand, you’ll have a good idea of what type of lifestyle you’ll be able to afford.
Decide if your retirement will be a one-off event or a gradual process
A key decision you will need to make is whether you intend to retire at a specific point or are looking to reduce your hours and retire more gradually.
Don’t underestimate what work means to you, in terms of providing you with a social network, a daily routine and personal discipline, as well as the obvious filling of your days.
Given all that, you may feel that stopping work on Friday and starting your retirement on the following Monday might be too abrupt. You may also have realised that you can’t currently afford the lifestyle you’d like, so continuing to work could help you further boost your retirement fund.
There are various options that could allow you to transition into retirement, rather than it being a one-off event. These could include:
- Doing the same job, but part-time rather than full-time
- Working on a consultancy basis
- Starting a completely new job that will provide a new challenge.
Subject to your eligibility, you don’t have to stop working to draw from your super fund. This means that with an income still coming in, even if it’s reduced, you’ll be putting less strain on your fund and other assets.
Get in touch
If you have any queries regarding your financial planning, please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
