PLAN YOUR IDEAL RETIREMENT NOW… IT’LL BE HERE BEFORE YOU KNOW IT
Like the old fable of the cricket singing the summer away while the ants prepare for the coming winter, you don’t want to be caught unawares by a change in life’s seasons. It is much harder to find a windfall than it is to strategically build your nest egg ahead of time.
49 might seem like an arbitrary age to pick. In some ways, it is. It’s also the most crucial part of your accumulation phase in life, where you still have the time to ease into planning for retirement before it’s on your doorstep.
There are three initial questions you should answer in order to benchmark your retirement planning:
1. How many years are left before you want to retire?
2. How much do you need to accumulate by that age to live comfortably?
3. How long do your retirement savings need to last?
If you know how much time you have, and how much you will spend per annum in retirement, you will be able to make an estimate of how much you will then need to save by the time you stop earning. Remember to account for inflation and all outgoings you will still have at retirement age. Got it? Great. Now assess areas where you might make changes to reduce your costs later; such as moving to a cheaper area, or downsizing your home.
This might sound strange, but… make sure you don’t underestimate your lifespan. New Zealanders have an average lifespan of 82 years, which has been steadily increasing year on year. Those at 65 who are fit and healthy have life expectancies well into their 90s. Better to plan for a very long, full life, than to run out of funds when you need them – risking your livelihood and independence right when you have more time to enjoy them.
The easiest path to a stress-free retirement is to get your ducks in a row beforehand, so everything is in place when you need it. Tidying your financial house will tie up a lot of these loose ends as a matter of course. Every little bit counts, but there are also ways you can be more strategic.
If you find transferring funds into savings isn’t working, set up automatic payments to an account that’s out of sight, out of mind. For investors, check in with your trusted financial adviser to ensure your investments align with your goals, the time you have before retirement, and how much risk you are comfortable taking on (your risk appetite).
While it’s a not-insignificant expense these days depending on your policy and level of cover), it’s worth shoring up your risk insurance to make sure you, your home, your income, and your loved ones aren’t left in the lurch after unforeseen events. You should also revisit your insurance cover whenever you have significant lifestyle events (e.g. having children, increased mortgages, changing jobs) to make sure everything important is accounted for and covered.
Another aspect of retirement planning, and something no one likes to think about, is what happens to our assets when we pass. But in the interests of making things as smooth as possible for your loved ones you need to have an up-to-date legal will outlining your final wishes, with
a clear designation of beneficiaries.
You don’t have to be near retirement to start enacting and refining your plan. Much like spring bulbs growing beneath the ground, your retirement funds can work away in the background and come into their own when the time is right; they just need the right growing environment to do so.
Give your future self a break by doing the mahi now. Try our Club 49 checklist to gauge your retirement readiness. Or, if you’re ready for a face-to-face chat, try your local fiduciary financial adviser.
Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a financial advisory group with offices in Hawke’s Bay and Wellington.
Any opinions expressed are of a general nature only, not to be construed or relied upon as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before\ making any financial decisions.
