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3 Financial Steps To Take Before Retiring

3 Financial Steps To Take Before Retiring

Without well-thought-out and planned steps, it’s hard to secure comfortable and stress-free senior years. You’d want to enjoy yourself with your loved ones, take upon different hobbies and activities, or travel without worrying too much about the financial side of things.

No matter how you’d like to spend your retirement days, living your retirement dream doesn’t come without having specific retirement planning strategies set in place such as the following:

1. Plan And Start Saving Early   

You’d want to start saving as early as possible. That way, you’ll have more time for your investments to grow. To start saving and planning, consider:   

Saving 15% off your pre-tax income

There’s a general rule of thumb that says you should put aside for your retirement budget, at least, 15% of your pre-tax income. If you plan to retire earlier, you should put more than 15% aside for your retirement budget. For example, saving only 1% more at your young age, after 20 or 30 years, adds 3% more to your retirement income. If you plan to work longer than required, your saving rate can be lower.

Planning your retirement savings coverage

Social security provides an income base in retirement for most people. The rest of the income comes from savings. It’s advisable to save enough to replace, at least, 45% of your preretirement income after social security accounting.

Setting an age-based savings goal   

One way to determine how much you should’ve saved up before you retire is by using an age-based savings calculation. That means you should’ve saved 1X your current income by the time you’re 30, 3X by the age of 40, 6X by the time you’re 50, 8X by the age of 60, and 10X by the time you’re 67.  

If you think you’ll not be able to set a sound financial plan for yourself, North Brisbane financial advisors can help you.  

Estimate what your retirement needs will be  

There’s yet another rule of thumb used to calculate your retirement needs. This rule doesn’t concentrate on savings but on spending and expenses. It states that you should set a goal of how much money you want to spend per year once you retire. Once you’ve set the goal, multiply it by 25. That’s how much you should have saved up by the time you retire.

The above-stated percentages and calculations are general and without assumed pension income. As such, they can’t apply to every person’s situation. There are more than a few things to consider and calculate to see where you stand financially and how much you need to have saved up to meet all your retirement needs.

retirement strategy

2. Boost Your Superannuation   

Superannuation or just super is money your employer is required by law to pay into a super fund. It’s the money you’ll receive as a pension once you retire.

If you’re unsure which superannuation fund to choose and what your saving options are, it’s best to look for expert financial advice.

Often, people find that this money isn’t enough to cover all their retirement needs. Luckily, there are ways you can boost your super and ultimately secure more money to enjoy your retirement days:

Keep track of your super accounts and merge if necessary 

You may have more than one super account if you had changed jobs often over the years. Merging your super accounts into one may reduce their annual fees. In some instances, though, it may cost you more, and it pays off to keep accounts separate.

If you’ve done work in the past and are unsure if you were paid super, you can check online with the government’s taxation office and claim your super.

Make additional contributions to your super fund

You can additionally boost your super by means of salary sacrifice contributions. This way, you forego part of your salary as a voluntary contribution to your employer’s compulsory contribution.

Another additional contribution, known as the non-concessional contribution, is to have your spouse contribute to your super.

Super contributions are a great way to boost your retirement fund as they’re generally less taxed than the marginal tax rate, and you can claim up to 100% of any personal contributions you made throughout the year.

Check if you’re eligible for government contributions

Low to middle-income earners who contribute to their super fund might be eligible for a government co-contribution of up to $500. Check if you’re one of them.

Make reviewing your super a habit  

Review annual statements from your super fund, and make a habit out of it. Consider if you’re getting value for money and if the returns are aligned with your retirement goals. If not, look for other funds to see if there’s a better option.

3. Adjust And Renew Your Portfolio 

You’d want to adjust and make changes to your portfolio that will allow withdrawals from your retirement savings in a way that will have your funds last throughout retirement years. There are three most important questions you need to have answers to: 

  • At what retirement withdrawal rate you won’t outlive your assets?  
  • What part of your portfolio will you sell each year to achieve that withdrawal rate? 
  • Is your portfolio diversified and risk-tolerant enough to avoid a significant loss for a retirement income?

Start Young  

It’s essential to take specific financial steps and to start planning for retirement from a young age. Otherwise, it’s hard to expect you’ll have your retirement days spent at ease and with peace of mind knowing that you’ll be able to have all your needs met. If you feel a little bit overwhelmed and don’t know how or where to start, there are financial advisors you can hire to help you carve out the best financial way so that you can live your retirement dreams well and financially prepared.

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