Everybody Retires… So Why Do I Need To Plan For Retirement?
Written by: Samantha Butcher l Advisory Team
We are all going to retire at some stage, some earlier than others and some may choose to keep working well into their 70’s and beyond.
There is no single answer as to when we should retire, we are all different with different needs and goals during and leading up to retirement. However, one thing we do have in common is the desire to be financially comfortable during retirement.
Being financially comfortable will mean different things for each of us, but one thing is common for everyone: seeking professional advice prior to retirement can lead to significantly different outcomes in terms of financial security and overall well-being during one’s retirement years. Planning for retirement is essential for several reasons, even though it might seem like a distant event.
Key Reasons Why You Need To Consider Retirement Planning:
- Financial Security
Retirement planning ensures that you have enough financial resources to maintain your desired lifestyle after you stop working. It helps you accumulate savings and investments to cover living expenses, healthcare, and other needs during your retirement years.
- Rising Life Expectancy
People are living longer, and life expectancy continues to increase. Retirement planning takes into account the possibility of a longer retirement period, ensuring that you won’t outlive your savings.
- Inflation
The cost of living tends to rise over time due to inflation. Retirement planning considers the impact of inflation on your expenses and helps you build a nest egg that can withstand the erosion of purchasing power.
- Age Pension May Not Be Enough
While Social Security benefits can provide some income during retirement, they may not be sufficient to cover all your expenses. Retirement planning allows you to supplement Social Security with other income sources, such as savings, investments, or pensions.
Want to know more about the age pension and how you can utilise it? Check out this blog we have previously put together: How much Age Pension Will I Get + How Can I Maximise It?
- Maintaining Independence
Planning for retirement empowers you to maintain your financial independence. Relying solely on others or government assistance may limit your choices and lifestyle during retirement.
- Unforeseen Circumstances
Life is unpredictable, and unexpected events such as medical emergencies, home repairs, or family needs can arise. Retirement planning helps create a financial cushion to handle unforeseen circumstances without jeopardising your retirement goals.
- Healthcare Costs
As you age, healthcare expenses are likely to increase. Planning for retirement includes considering the potential costs of medical care and long-term care, ensuring that you have the resources to cover these expenses.
Want to know more about when you can afford retirement? Check out this blog we have previously put together: How Do I Know When I Can Afford to Retire?
- Enjoying Your Retirement
Retirement planning isn’t just about financial security; it’s also about having the freedom to pursue your interests, hobbies, and passions during your retirement years. Adequate planning allows you to enjoy the fruits of your labour without constantly worrying about finances.
- Peace Of Mind
Knowing that you have a well-thought-out retirement plan in place can provide peace of mind. It reduces financial stress and allows you to focus on enjoying your retirement.
Want to know more about the transition to retirement? Check out this previous blog we put together: How Does The Transitions To Retirement Work?
Do I Need A Financial Planner for Retirement Planning?
It is clear that it is important to plan for retirement. The next question is, are you able to do this on your own, without the assistance and guidance of a professional?
Superannuation law, tax law and social security are three very complex areas. There is a saying “you don’t know what you don’t know”. A qualified financial adviser who specialises in retirement planning will be able to guide you through the myriad of pathways that are available to you. Choosing the right pathway for you takes a lot of skill and knowledge in this area.
At a very high level, below are some key differences between seeking the advice of an expert as opposed to trying to navigate this mine field yourself:
1. Financial Preparedness:
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- Seeking Advice: With professional financial advice, individuals can create a comprehensive retirement plan that considers their specific financial situation, goals, and risk tolerance. This can include strategies for saving, investing, and managing debt to ensure a solid financial foundation.
- Not Seeking Advice: Without professional guidance, individuals may lack a structured plan and may not have adequately saved or invested for retirement. This can lead to financial stress and difficulties in meeting expenses during retirement.
2. Optimising Investments:
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- Seeking Advice: Financial advisers can provide guidance on optimising investment portfolios, taking into account factors such as risk tolerance, time horizon, and financial goals. This can potentially lead to better investment returns and long-term growth.
- Not Seeking Advice: Individuals may make investment decisions without a clear understanding of their risk tolerance or the appropriate investment vehicles for their goals. This can result in suboptimal returns or excessive risk.
3. Tax Planning:
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- Seeking Advice: Financial advisers can help with tax planning strategies, such as optimising contributions to tax-advantaged accounts and minimising tax liabilities. This can result in tax-efficient income during retirement.
- Not Seeking Advice: Individuals may miss out on potential tax advantages, leading to higher tax payments and reduced disposable income in retirement.
4. Social Security Optimisation:
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- Seeking Advice: Financial advisers can help individuals optimise their Social Security entitlements by structuring assets and income in a way that maximises their benefits.
- Not Seeking Advice: Without guidance, individuals may make suboptimal decisions regarding when to claim Social Security benefits or how to maximise their entitlement, potentially reducing their payment
5. Risk Management:
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- Seeking Advice: Financial advisers can assist in assessing and managing risks, including market volatility, inflation, and unexpected expenses. This helps individuals build a resilient retirement plan.
- Not Seeking Advice: Lack of risk management can expose individuals to unforeseen financial challenges, such as market downturns or unexpected healthcare costs.
6. Estate Planning:
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- Seeking Advice: Financial advisers can help individuals with estate planning, ensuring that their assets are distributed according to their wishes and minimising potential tax implications.
- Not Seeking Advice: Without proper estate planning, individuals may face complications in the distribution of assets, and their beneficiaries may incur unnecessary taxes and legal expenses.
Financial Security in Retirement Planning with Canny Advisory
Retirement planning is crucial for maintaining financial stability, independence, and a fulfilling lifestyle during your later years. It’s a proactive approach to ensure that you are well-prepared for the changes and challenges that come with retirement.
Seeking financial advice prior to retirement provides individuals with the knowledge and guidance needed to make informed decisions, optimise their financial situation, and increase the likelihood of a secure and comfortable retirement. Not seeking advice, on the other hand, may lead to missed opportunities, inadequate planning, and increased financial uncertainty during retirement.
Get in touch with our team to find out how we can help you kick-start your retirement planning today.
