Early retirement guide - how to live the Australian dream
Eat, sleep, work and repeat… wrong! Eat under the stars in Australia’s red centre, sleep in and work as you please, live the Australian retirement dream.
Whether you need to or chose to retire early, creating a plan will give your money the best chance at lasting the distance allowing you to truly live your retirement dream. Here are a few tips on how you can do it:
A vision for your retirement.
Having a clear vision of your life during retirement is the first and most crucial step in planning your retirement. Paint a picture of what your retirement looks like; fishing and golf are great part-time activities but how will you fill the additional 40 - 50 hours you once spent at work?
Be prepared to replace the psychological and social benefits that work environments provide with something else. Does this mean part-time work or volunteering? Many underestimate the radical shift no longer working full-time takes on their social health.
Will you be dining on caviar, enjoying the finer things or will you be maintaining a modest lifestyle with overseas or interstate adventures once a year?
Understanding your vision for retirement will then allow you to make financial plans to help you meet these goals.
Estimate your retirement expenses.
Knowing the ‘magic number of dollars you need to achieve the lifestyle you want is the million or $640,000 dollar question according to The Australian Super Fund Association (ASFA).
To start working out how much you need, try using the Australian Government’s Moneysmart retirement planning calculator. The calculator helps you find out how contributions, investment options, fees and retirement age affect your retirement income from superannuation; in addition to the income you’re likely to have from superannuation and the Age Pension when you retire.
Take the income calculation and simply add the extra amount you think you’ll need to fund your ideal retirement; this is your ‘Magic number’. So if you get $60,000 a year from super and the Age pension, but your plan of enjoying a trip to Noosa each winter is estimated to cost an additional $4,000, your magic number is $64,000.
Start boosting your super and your savings.
A bit of short-term pain for some long-term gain begins with increasing your super contributions as you edge towards retirement. The higher your super balance, the more opportunity you have to generate investment returns, and the returns you receive benefit from compounding. Find out more on that here
Salary sacrifice payments are additional super contributions before tax. Your employer pays a portion of your salary directly to your super. There are a few additional benefits to this, your tax rate may be lower and you may reduce your taxable income.
Similarly, you can boost your super after you’re paid. You can make a payment of up to any amount, with a maximum of $100,000 in each year. You’re not locked into regular payments, so you can make them when it suits you, or perhaps when you come into a bit of extra cash.
If you have owned your property for 10 years or more and are 65 years or older, you could be eligible to contribute up to $300,000 of the sale of your family home into your super.
Downsize your home, upsize your retirement
The obvious benefits to downsizing your home are the financial ones. Free up equity, reduce your insurance and utilities and stop spending on the upkeep of your home. Along with that comes the reduced time spent on property maintenance. Forget mowing the lawn, repairing that leaky tap and everything else on that former maintenance ‘to do’ list. Downsizing doesn’t mean moving to a retirement village, it’s finding a home that suits your retirement lifestyle. A home that’s right for the stage of life you’re in right now. A home that provides truly independent living, surrounded by like-minded people who are at a similar stage of their lives. Plus, no renters next door!
When you downsize to a lifestyle community, you can forget paying for your weekly gym membership, cinema tickets, bowls membership and so much more because you will have best-in-class, award winning facilities right on your doorstep.
Plus! When you downsize to a Lifestyle Community, you can lock up, leave and travel whenever you please. There are onsite community managers to keep an eye on things when you go away.
Seek financial advice
Sometimes you have to spend a little to make a little! You have worked hard, the last thing you want to do is blow your nest egg. Seeking advice on how to manage your super, understand your entitlements, manage investments and debts and help create rigor around your spending. A financial advisor can help you set realistic financial goals so you feel confident that your retirement plans are achievable.
For many, living the dream for many Australians means having the lifestyle of their choice. Whatever shape or form your retirement dream takes - with the right planning, attitude and advice, you can move forward each day knowing you’re taking steps towards greater financial independence and towards your version of the great Australian retirement dream.
*This article provides general information only and should not be relied upon as personal financial advice. Lifestyle Communities is not a financial adviser and you should consider seeking independent legal, financial, taxation or other advice to check how this information relates to your unique circumstances.
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