Budgeting for retirement is one of the key steps that we discuss with clients as part of their retirement preparation. It’s similar to packing for a holiday, just as you pack carefully and plan your itinerary for a successful trip, setting up your finances and lifestyle in advance ensures a smooth and enjoyable retirement.

Why Retirement Planning Matters

Much like travel, retirement requires financial preparation to afford the lifestyle you want. Without proper planning, you may find yourself limited in what you can do and how comfortably you can live.

A retirement confidence report issued by Australian Super in 2022 found that 38% of the 1,500 Australians surveyed aged over 50, expressed some concerns about their retirement savings being insufficient.

Key considerations such as maintaining your standard of living, accessing the Age Pension, maximising government benefits, housing, health concerns, and managing expenses can all create uncertainty.

By planning early, you can reduce financial stress and increase confidence in your retirement years. Here are four key areas to focus on.

1) Estimating Your Retirement Income Needs

In retirement, you’ll rely on the wealth you’ve accumulated throughout your working years, supplemented by the Age Pension if eligible.

Start by creating a budget that excludes any work-related costs. Consider two types of income needs:

Essential Expenses - covering daily necessities like housing, utilities, food and healthcare
Lifestyle Expenses - funding discretionary activities such as travel, hobbies and entertainment

Additionally, plan for larger expenses such as home renovations, debt repayments or gifts to family members if applicable.

Accounting for Inflation and Rising Costs

Inflation affects the purchasing power of our savings over time. A sustainable retirement plan should factor in annual cost of living adjustments to ensure your funds last and account for the costs of inflation.

Superannuation and Investment Growth

In retirement, superannuation is generally our primary retirement asset. Reviewing your investment strategy to match your retirement goals and risk tolerance is essential. If you have assets outside of super, assess their income potential and tax implications.

2) Evaluating Your Assets

Review your assets and determine which you want to retain, sell or reinvest. Some assets can be converted into income-generating investments to boost liquidity in retirement.

Diversifying Your Income Sources

Instead of depending solely on superannuation or the Age Pension, consider how other investment options may support you in your retirement.

3) Deciding on Living Arrangements

Being a homeowner may help you to be eligible for a higher level of social security support as the primary residence is usually exempt from the asset test. If you plan to downsize, the downsizer contribution scheme can help to boost retirement savings.

Pros and Cons of Downsizing

Downsizing can reduce expenses and unlock capital, but it’s important to consider factors such as:

Transaction costs: Stamp duty, real estate agent fees, and relocation expenses
Lifestyle changes: Moving may affect your social network and overall well-being
Future accessibility: Consider whether a new home will meet your mobility needs as you age

If you are renting, your living expenses may be higher and therefore it is important to plan to generate enough income to cover your ongoing living expenses and rental obligations.

4) Managing Health and Longevity Risks

With increasing life expectancy, retirement planning should account for the possibility of living longer than expected. Assessing your personal and family health history can help when considering potential medical costs and future aged care needs.

Planning for Healthcare Costs

Medical expenses tend to rise with age. Consider if private health insurance is appropriate for you including extras such as dental, optical and physio for example. Understanding Medicare benefits and potential out of pocket expenses is also important.

Addressing Cognitive Decline

Cognitive decline can impact financial decision making. Establishing the correct estate planning tools such as a power of attorney can support you and your wishes should you become unable to make decisions independently.

Additional Factors to Consider

Estate Planning

A well-structured estate plan can support you so that your assets are distributed as intended. The key considerations include choosing a beneficiary for your assets, minimising taxes for those that may inherit your assets, and considering asset structures for protection if necessary.

Lifestyle Planning for Retirement

Retirement planning is about creating financial security while balancing creating a fulfilling lifestyle. Key questions to ask yourself are:

How will you spend your time? Having a purpose whether through travel, hobbies, or learning a new skill is essential
Will you continue to work part-time? Some retirees choose to work casually or volunteer for social and financial benefits
Where do you want to live? Consider whether staying in your current location or relocating better suits your retirement goals.

Government Benefits and Support

Understanding available government assistance can help ease financial pressure. Some considerations include:

Age Pension: Check eligibility and how your assets and income affect payments
Health Cards: Confirm eligibility for health care cards
Concession Programs: Discounts on utilities, transport and council rates may be available

Seeking Professional Advice

Early preparation can make all the difference in achieving a financially secure retirement. Consulting a financial advisor can help tailor a strategy to your unique needs, ensuring you make informed decisions about income, assets and long-term planning.

Retirement can be the longest “holiday” you will ever take, but without preparation, it may not be as enjoyable as you envision. By carefully planning your income, assets, housing, and healthcare needs, you can create a financially secure and fulfilling retirement.

Regardless of where you are in your retirement journey, taking proactive steps today will set you up for greater peace of mind and financial stability in the years ahead.

About Us

After working as an advisor for a decade, Joel founded Unified Wealth.

Unified Wealth specialises in helping clients who are facing life’s big decisions.

Whether you’re contemplating your first property, growing your family or starting your investment journey we can help you focus on the simple steps to help you make your goals reality.

Our priority is making sure you have all the right information available to make the best possible decisions for you and those you love.

Our company values are:

Unity - We are most effective when we work together as a team

Trust - We are trustworthy and act in your best interests

Transparency - We are honest and communicate openly

Education - We are committed to lifelong education

At Unified Wealth our team is highly experienced and provides goal-based advice and solutions for a range of advice strategies.

Speak to our team today.

Planning For Your Longest Holiday