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Retirement Planning: 5 Top Tips

What does your ideal retirement look like? For some, it might be fishing at the beach, for others, a cruise around the Caribbean! Whatever your retirement dreams are, planning for your retirement today will ensure you’re on track to reach them. We’ve put together our top tips for successful retirement planning.

1. Do some daydreaming
What does your ideal retirement look like? This will be the first step to establishing what income you’ll need to maintain your desired lifestyle. There is a catch to this, though, you must be realistic. Like any goal setting, if you set the bar too high you run the risk of feeling deflated if you can’t achieve it. If you set the bar too low, you might get caught short.  We’d recommend setting some S.M.A.R.T goals for your retirement. These are goals that are: Specific, Measurable, Attainable, Realistic, and Timely. By setting clear goals, your dreams are more likely to turn into reality.

2. Set a realistic retirement age 
Remember those SMART goals we were talking about? Well, one of them should be applied to your retirement age. We’ve had many a client tell us that they love their job and are happy to work to 75! Funnily enough, we don’t often hear it from clients over 55 years old. As admirable as this attitude is, there is no way to predict how you will feel after say, another 20 years in the workforce.  That’s why we recommend you plan for 65 at the latest. You might choose to work part-time, volunteer or explore a hobby or passion. Regardless, it certainly would be nice to have the choice when you get there.

3. Know your income requirements
A recent study by the Financial Markets Authority found that fewer than half of Kiwis nearing retirement have actually calculated what their regular expenses could be in retirement. That’s scary stuff! To calculate what income you’ll require during your retirement you need to soundly estimate:

  • How many years you’ll likely have in retirement
  • Your expenses
  • Your income throughout your retirement

There are some great free online tools to get you started such as the Sorted Retirement Calculator. After doing this, you may find that relying on New Zealand Superannuation is not enough to provide you with the lifestyle of your dreams. If so, we suggest that you look into investment options that will provide you with additional income throughout your retirement. 

4. Factor in health and long-term care cost
It’s no secret that as we get older, we become more vulnerable to illness or injury. Factoring in these costs will be a great way to ensure that you have quick access to quality care in your retirement. One thing to note is that as we get older our insurance premiums get higher. This means that medical insurance can become unaffordable for some. However, there are options to make it more accessible such as reducing cover. Some people choose to self-insure, which means that they set aside money prior to retirement to cover these costs. Regardless, it’s important to know what options you have available to you. When it comes to factoring in health and long-term costs we suggest you expect the best, but plan for the worst.  If you’d like some more advice in this area, please talk to a qualified financial adviser.

5. Start today and review regularly
Like any good vintage, your money increases in value over time. There are several ways that you can make your money work for you over time. One of these is compound interest, which Albert Einstein famously referred to as the eighth wonder of the world!  Compound interest can be thought of as “interest on interest” and is a smart way to grow your wealth over time. Understanding compound interest is just one piece of the puzzle and it’s wise to consider other income generating options to which we refer to as your investment portfolio.

Once you’ve set up your investment portfolio, you’ll want to make sure that you check in on a regular basis to review how things are tracking. At Wealth Works, we know it’s important to review our client retirement plans annually. This is to make sure we’re heading in the right direction and making the most of any new opportunities that may arise. This is definitely not a case of out of sight out of mind! 

Have you started planning for your retirement? We'd love to have an obligation free chat about how we can help you reach your retirement goals. Take the first step toward financial freedom and register for a Free
 Retirement Planning Consultation with one of our fully qualified advisers. 

Call us on 09 306 5820

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