Data shows that seven out of 10 Aussies over 55 can probably take an early retirement. But there’s work to be done.
If you’ve been madly punching the numbers into online retirement calculators and coming up short, you’re not alone. Cameron Dickson, Managing Director of financial advisory company The Moreton Group, reckons most calculators are oversimplified.
“They perpetuate a myth that Australians can’t afford to retire and exacerbate anxiety in a huge proportion of working Australians looking to change their lifestyles from work to retirement in the next five to ten years,” says Dickson.
He believes that many near-retirees don’t know what’s possible. For instance, “they don’t realise they can retire on a hybrid-financial model, using their super and government entitlements to enhance their quality of life or bring retirement forward.”
There is also the option of continuing to work part time, or even start a new online business.
Early advice can mean early retirement
But rather than seek financial advice to understand all their options, The Moreton Group data indicates that Australians tend to shy away from seeking advice until a health scare forces their hand.
““Those who feel they have too little money often find the discussion to be embarrassing,” suggests Dickson. “This awkward silence only intensifies the general anxiety in the community and a lot of people don’t seek advice and end up making decisions based on what they read online.”
Instead, if you want an early retirement, it makes sense to seek advice upfront.
“If you plan what you want to do and work backwards you will probably find you have enough money to retire earlier than you think,” Dickson says. “People should think about what’s possible first.”
Dickson outlines the following strategy to help get your dream of early retirement on track.
1. Look past your age and super
“Many would-be retirees don’t realise they can retire on a hybrid-financial model, using their super and government entitlements to enhance their quality of life or bring retirement forward,” says Dickson.
Rather than focusing only on how much super you have at what age, he suggests taking into consideration a wide range of things, including:
- working status
- health
- assets and income
- any government benefits you are entitled to
- the legacy you want to provide
- flexibility for the unknown
- whether there are family members you wish to help
“There’s much more to it than age and what’s in your super account” he emphasises.
2. Think about what you want to do in retirement
There’s no point planning an early retirement if you don’t actually know what retiring looks like.
So many of us define ourselves by our work, so when it comes time to retire we have no idea what we want to do. To help you visualise it, think about what you currently enjoy. What are the little things in your day-to-day life that make you happy? Are there things you would you like to do more of? What kind of person do you want to be? How will the community you live in bring you quality of life?
Follow those small threads of passion and expand on the things you currently find enjoyable. Whether it’s working in your garden, volunteering in a mentorship program or taking off in your caravan for months at a time.
It pays to think about your relationship status as well. Retirement can look vastly different for a single compared to a couple, as figures and entitlements differ so greatly. As a couple you have the ability to structure your funds in ways that aren’t possible as a single person.
“Once you’ve established where you want to be and the life you want as a retiree, you can work backwards to set yourself up for success,” advises Dickson. “When establishing your goals remember to consider your proximity to extended family and remember that your level of ability and energy will decrease over time – so plan those big active holidays earlier in retirement.”
3. Know your options
Plan ahead and look into what government benefits are available. You might be eligible for more help than you think.
The age pension is the most obvious benefit that people consider and it also triggers discounts on a range of items such as energy, council rates, registrations and so on.
There are also benefits like the Commonwealth Seniors Health Care Card, which can provide discounts on medication and medical appointments. The level of assets you can have and still benefit from this card, can be several million dollars depending on how they are structured. There is also a low income health care card available for those under pension age if most of your assets are structured correctly and not classed as assessable income, for example if you have all of your investments in a Superannuation Pension.
“One less known option is that if you are over 60, but not yet pension age, you can apply for Jobseeker and meet the requirements by volunteering a certain number of hours per fortnight,” says Dickson. “You would be simultaneously helping a cause you are passionate about.”
4. Do the hard work now
This isn’t a tip that Dickson mentioned, but it bears a spot in this list. After all, when you retire, you want to be able to afford a lifestyle that is at least as good – if not better – than the one you’re living now. No one wants to be poor in retirement.
So, get a grip on things now. Stop spending money on things you don’t need so you can put it away towards funding an early retirement. Every dollar you invest now will be worth far more to you in future.
You can save money in every aspect of your life and it doesn’t need to feel like you’re missing out. You can still live a luxe life, just not a short-sighted one.
Do the basics now: the budget, the planning and the saving.
5. Get the professionals onto it
At the end of the day, planning your retirement is not something you want to do haphazardly. Seeking professional advice from experts in the field is the best way to put you on track for an early retirement.
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