Pre-retirement checklist: Questions to ask before you make the jump
Written and accurate as at: Dec 13, 2024 Current Stats & Facts
While there’s an excitement to not knowing what your post-work years have in store for you, chances are you don’t want to put a foot wrong.
That’s why the lead-up to retirement is so important — it’s a time to reflect on what you want in the years ahead and ask yourself if you’ve done all you can to make it possible.
Below are some questions to consider as you prepare to make the jump.
Is your super sorted?
Decades of contributing to your super will have hopefully left you with a tidy sum, and it won’t be long now before you’ll be able to access it. You should have an idea of what your balance will look like come retirement, but will it be enough to secure the lifestyle you want?
Questions to ask yourself:
- If your super balance isn’t as high as you’d like it to be, have you thought about topping it up? This can be done by entering a salary sacrifice arrangement with your employer or by making voluntary contributions from your savings or take-home pay.
- Have you decided whether you’ll be receiving your super as an income stream, a lump sum, or a combination of both? And are you aware of the tax implications of each option?
- Have you considered a transition to retirement pension? This can allow you to reduce your work hours while using part of your super to make up for the shortfall in pay.
What about other income sources?
Are there any other income sources that you’ll be able to rely on in retirement? Many people can count on investment properties or dividend-producing shares to supplement their super. You might even have savings that produce enough interest to cover part of your expenses each month.
Questions to ask yourself:
- If you have investments outside super, have you considered whether they still suit your risk profile, goals and circumstances? And will you hold them for a while longer to benefit from the dividends or do you plan to gradually sell them off?
- Have you worked out how much you’ll be spending in retirement? The ASFA Retirement Standard suggests a couple who own their own home and intend to live a comfortable lifestyle in retirement will need around $73,337 per year. Will your income sources be able to cover this?
- Will you be eligible for the government Age Pension? And have you looked into the other benefits that are available to older Australians, such as the Pensioner Concession Card and Health Care Card, which can help you save money?
What will your lifestyle in retirement look like?
With your working years behind you (and blaring alarms and long commutes now a thing of the past), do you have an idea of how you’ll be spending all your free time? Retirement can be a golden opportunity to take up new activities and rediscover your passion for old ones, and while some of these might not be so friendly to your wallet, there are plenty that are inexpensive or even free.
Questions to ask yourself:
- Do you have a vision of the type of lifestyle you want in retirement? Will it be lively and full of travel or are you content to stay put and focus on spending quality time with family and friends?
- Will you be taking on babysitting duties for your grandkids? And does your budget allow for any financial support or gifts you intend to give your children or grandchildren?
- If you’re planning on downsizing your home, have you considered making a downsizer contribution to your super? So long as you’re 55 or older and meet the eligibility criteria, you’ll be able to top up your super (up to $300,000 for singles and $600,000 for couples), from the proceeds of your property sale.
Do you have any outstanding debts?
Retiring with debt isn’t exactly ideal — it can put your budget under pressure and leave you vulnerable to interest rate fluctuations — but it’s becoming increasingly common. If debt has followed you into old age, you might need to come up with a plan to address it or risk having to budget around it for years to come.
Questions to ask yourself:
- Do you have a strategy for tackling your debt? Some people prefer to pay down the smallest debts first and work their way up to the larger ones, while others focus on high interest debt like credit cards with the goal of saving money over the long-run.
- Have you considered putting off retirement? This can give you time to address any outstanding loans and leave you more financially resilient for when you do eventually hang up your hat.
- If you owe money on an investment property (or you have a property portfolio that’s heavily leveraged), is the rent you’re receiving enough to cover the repayments?
Have you tied up other loose ends?
Beyond your finances and how you’ll be managing the day-to-day reality of retirement, have you given any thought to your estate plan? Getting your affairs in order takes time and will typically involve in-depth discussions with a lawyer and financial adviser, so make sure you have a team on your side you can trust.
Questions to ask yourself:
- Do you have a Will, and if so, have there been any major changes to your circumstances since it was drawn up that would warrant an update? Beyond your Will, have you looked into things like an Advance Care Directive and Enduring Power of Attorney?
- Do you have a valid beneficiary nominated for your super? This is crucial as super doesn’t automatically flow to your estate when you die and generally isn’t subject to the terms laid out in your Will (unless you nominate your legal personal representative as a beneficiary).
- Have you had the aged care discussion with your family? This doesn’t have to centre on residential aged care facilities — you might prefer to access in-home care, which would allow you to ‘age in place’ instead.
If retirement is just around the corner and you're still feeling a bit anxious, consider speaking to a financial adviser. They can give your finances a health check and help you identify areas that might require more focus.
