What age can I retire?
5 ways to know if you're at retirement age.
What age can I retire? We are often asked this question at FinancePath. And, the answer is simple you can retire at any age you like. The real question is: are you ready to retire?
But before we delve into what financial considerations you must make when preparing for retirement, you should first ensure you're mentally prepared to give up work. After all, it's no secret that our purpose in life is often entwined with our occupation.
So, what will you replace your job with when you retire?
Perhaps your partner has a bunch of odd jobs for you to do and (sadly) you won't get paid for these! Or maybe you have personal interests or pursuits that you just can't wait to sink your teeth into.
Once you've got a grip of how you will identify with and embrace retirement, then it's about knowing your numbers. Here's how.
Start by figuring out how much money you need to fund the lifestyle you want if you don't know this you're not ready to retire!
A great place to start is with the Association of Superannuation Funds of Australia Limited. The ASFA Retirement Standards take a budget driven approach to the question of ideal retirement income. It's about analysing different cost of living items at today's prices, before including them in a generic retirement budget. The ASFA Retirement Standard is based on:
- A modest lifestyle: considered to be better than the Age Pension, but still only able to afford fairly basic activities; and
- A comfortable retirement: considered to be one that allows a healthy retiree to be involved in a broad range of leisure and recreational activities. This covers affordability for household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, domestic and occasional international travel.
Next, understand what expenses you can expect in retirement which you haven't incurred during your working life. For example, your mobile phone and internet bill might jump because you have more time to call friends and family and surf the net. Plus, your transportation costs that were once covered by your employer could rise. Not to mention the likelihood of increasing medical expenses as you age.
Find out if you're entitled to any government support. You may be eligible for a full or partial Commonwealth Age Pension, veteran's pensions, company pension schemes or regular annuity payments. Any of these expected regular income sources should be reflected in your retirement plan. For more information about the eligibility criteria and payment rates of the Age Pension visit Centrelink.
Believe it or not knowing what age you can retire, is not simply a matter of reaching a golden amount of superannuation. Sure, your super stash is important, but your ultimate retirement plan should include deriving income from at least two main sources:
1. Returns on Investment: Interest or other forms of growth such as dividends derived from capital (or lump sum) investments. Returns on investment is a great way to cover expenditure that your regular retirement income can't.
2. Regular Monthly Income: Pensions, annuity payments, salaries for part-time work and the Commonwealth Age Pension.
Don't worry, we're not proposing you book into a retirement village, just yet! We're simply suggesting it's worth considering whether your current home is the best place for you in retirement. By downsizing or moving to a cheaper area you could free up equity in your home which will help fund your retirement.
To find if your income streams are enough to cover your expenses during retirement, speak with one of our lending consultants today.
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