Good to Great: How to Scale With an Outsourced CFO

You’re working hard and living life to the fullest. Planning for retirement may be the furthest thing from your mind. But if retirement is far away, you’re in the best possible position to start planning now.

With time on your side, your investments will have years to grow and mature. But even if you’re nearing retirement and need to catch up, it’s not too late to improve your future.

Before you sit down to make a plan, consider the big-picture questions. When you have answers to these questions, you’ll be ready to meet with your financial planner and mould your hopes into definable goals and tasks. Let’s take a look at the six critical questions you should answer before planning your retirement.

 

1. At what age do I want to retire?

Without a firm idea about when you want to retire, it’s impossible to calculate how much money you’ll need. Fortunately, there’s no predetermined retirement age in Australia; people work as long as they like. It’s a personal decision that involves many different factors:

• Career aspirations
• Business goals
• Health
• Lifestyle
• Spouse’s plans
• Family responsibilities
• Financial readiness

However, there’s an important milestone that will likely affect when you decide to take the leap.

Preservation Age

When you reach the preservation age, you can access the funds you’ve saved through superannuation. If you were born on or after 1 July 1964, your preservation age is 60. If you were born before this date, you might reach your benchmark as early as age 55. Check the schedule for more details.

 

2. What kind of lifestyle do I want to have?

John and Kate live next door to each other in similar homes. Although these neighbours appear to lead parallel lives, they have very different hopes for their retirement years.

John wants nothing more than to stay in his current home, spend time with his grandchildren, and tend his ever-growing garden. He has spent his career staying up late and travelling to meetings. He just wants to rest.

Kate, on the other hand, wants to spend her retirement exploring the world and living overseas. She views retirement as a time to spread her wings and experience new places and cultures.

Kate’s hoped-for lifestyle will require significantly more funding than John’s, and that’s just fine, as long as she plans for it and protects her growing wealth. How about you? What kind of lifestyle do you want to lead when you no longer have to work for a living and care for your family?

 

3. Where will I live?

If you plan on staying in your current home, you already know what to expect in terms of expenses. Most people end up spending 70 to 80 per cent of their ongoing costs after they retire.

If you pay off your current mortgage and stay in your home, like John from our previous example, your housing costs will be negligible. If, like Kate, you move to a more expensive area, you’ll need to factor those costs into your overall retirement plan.

 

4. Do I want to leave an inheritance?

Some people want to leave a significant inheritance to their spouse, children or even a charity or other organisation. If this is an essential priority for you, consider how much you’d like to leave in addition to the amount you’ll need for your maintenance.

Discuss the use of a family trust when you speak to your wealth advisor about estate planning possibilities.

 

5. What about aged care?

Retirement has many seasons, from travelling and taking up new hobbies to winding down and facing health issues. What are your plans for your later years?

If you want to prepare for living in aged care accommodations at some point in your life, talk with your financial advisor about the associated costs. By planning for these contingencies while you’re young, you can reduce future stress and anxiety, both for yourself and your family.

 

 

6. What about my business?

How will your business factor in your retirement planning? Do you plan on selling it? Passing it down to a younger member of the family? For business owners, retirement planning goes hand in hand with business succession planning. It’s challenging to consider one topic without working on the other.

 

What’s Next?

Once you’ve answered these big-picture questions, you’re in a great position to work out the details. You can calculate how much you’ll need, how much you currently have and what it will take to get you from here to there.

Your wealth adviser will help you evaluate your appetite for investment risk and develop a plan. With end goals in mind, you might choose to salary sacrifice to speed up your savings and reduce your tax burden. Perhaps an investment property would fill a gap in your portfolio.

Whatever you choose to do, work on it steadily and review your plan often. Circumstances change, and you will need to update your beneficiaries, evaluate your investments and make sure you’re still on track.

To set up a time to meet with a wealth adviser, reach out to us at Altus. And remember, the sooner you start planning, the better off you’ll be when that golden day comes.