Retirement is a major milestone in life, requiring careful planning and preparation. If you’re about a decade away from retiring, taking the necessary steps to ensure financial security in your golden years is essential. In this article, we’ll explore seven key financial things you should consider doing a decade before retiring. By evaluating your retirement goals, assessing your current financial situation, and implementing strategies to maximise your savings, you can set yourself up for a comfortable retirement.
Evaluating Your Retirement Planning Goals
As you approach retirement, it’s crucial to have a clear understanding of your retirement goals. Take some time to assess what you want your retirement to look like. Are you planning to travel extensively or pursue expensive hobbies? Do you want to downsize your home or stay in your current place? Understanding your goals will help determine the amount of money you’ll need to save.
Consider factors such as healthcare expenses, housing costs, and your desired lifestyle. Research the average cost of living in your desired retirement location, taking into consideration essential expenses like housing, groceries, and health care, as well as how inflation may impact these costs over time. Once you have a clear vision of your retirement, you can better estimate how much money you’ll require.
Additionally, it’s important to consider how you will spend your time in retirement. Will you volunteer, work part-time, or start a new hobby? Having a plan for staying active and engaged can greatly impact your overall happiness and well-being during retirement.
Furthermore, don’t forget to account for unexpected expenses during retirement. It’s wise to have a financial cushion to cover emergencies or unforeseen costs that could potentially derail your retirement plans.
2. Assessing Your Current Financial Situation
Before making significant financial decisions, assessing your current financial situation is important. Calculate your net worth, which includes your assets and liabilities. Knowing where you stand financially can help determine how much you need to save over the next decade.
Review your investment portfolios, retirement accounts, and other assets to ensure they align with your retirement goals. Many workers are underprepared, with minimal or no savings contributed to a retirement fund, which poses a challenge for achieving a comfortable retirement. If necessary, consider working with a financial advisor to get a comprehensive overview of your financial picture.
Additionally, it’s crucial to analyse your spending habits and budget. Understanding where your money goes each month can highlight areas where you can cut back and save more effectively. Consider using budgeting tools or apps to track your expenses and identify opportunities for improvement.
Furthermore, take the time to assess your insurance coverage, including health, life, auto, and home insurance policies. Ensure that you have adequate coverage to protect yourself and your assets in case of unexpected events. Reviewing and updating your insurance policies regularly can help you avoid gaps in coverage and potentially save you money in the long run.
Please watch my one-minute video below, “How much do I need to save to retire in 10 years?”
Creating a Retirement Income Savings Plan
Now that you clearly understand your retirement goals and current financial situation, it’s time to create a retirement savings plan. This plan will serve as a roadmap for maximizing your retirement contributions and achieving your financial goals over the next decade.
Start by determining how much you need to save each month to reach your desired retirement savings. Consider automating your savings by setting up regular contributions to your retirement accounts. Treating your retirement savings as a priority expense ensures that you’re consistently building a nest egg for the future.
Additionally, it’s essential to diversify your retirement savings to mitigate risk and maximise returns. Explore different investment options such as stocks, bonds, ETFs, and real estate to build a well-rounded portfolio. Remember, diversification is key to weathering market fluctuations and ensuring long-term financial stability.
Furthermore, regularly review and adjust your retirement savings plan as needed. Life circumstances and financial goals may change over time, so it’s crucial to reassess your plan periodically. Consult with a financial advisor to get personalised guidance and ensure your retirement savings strategy aligns with your objectives.
4. Maximising Concessional Super Contributions
Superannuation is one of the most tax-effective structures available to Australians.
People have a misconception about super and often think that because the government keeps changing the rules they neglect to take advantage of the best tax structure to create your lifetime income plan.
Concessional Contributions of up to $27,500 are taxed at up to 15% for individuals which is going up to $30,000 in 2025 financial year.
The main advantage of growing your wealth inside super is that the tax rate is only 15% in super compared to 47% if you are on the top MTR. This strategy could result in a tax saving of up to 32% on investment earnings – and help you retire with more.
If you have meet a condition of release, you can take advantage of the superannuation pension phase, which means that earnings in the account are tax-free. Pension payments to fund your retirement are also tax free for the rest of your life.
You cannot get better than 0% tax which is why super is the best structure for your lifetime income plan.
5. Compound interest & Non-Concessional Contributions
One of the most powerful levers in growing your retirement savings before retirement is time and the power of compound investment. Superannuation, invested well, at an average return of 7-10 per cent a year, can double in value every seven to ten years through passive compound interest alone.
Something you could do with your monthly surplus is take advantage of Non-concessional contributions.
Most people are unaware that they can make a cash contribution of $120,000 into their superannuation fund each financial year as a non-concessional contribution.
If your super balance is less than $1.9 million, you may also be entitled to take advantage of the 3-year bring-forward rule, which involves pre-paying $360,000 worth of non-concessional contributions into super.
6. Create a Sustainable Retirement Budget
Creating a sustainable retirement budget is crucial to ensure that your retirement savings last throughout your golden years. A well-thought-out budget helps you manage your finances effectively, allowing you to enjoy your retirement without financial stress. Here are some steps to create a sustainable retirement budget:
Estimate Your Retirement Income: Start by calculating your expected retirement income from various sources such as Social Security benefits, pensions, and withdrawals from retirement accounts. This retirement income estimate will give you a clear picture of the funds available to you.
Track Your Expenses: Keep a detailed record of your current expenses to understand where your money is going. This will help you identify areas where you can cut back and save more.
Categorize Your Expenses: Divide your expenses into essential needs (housing, food, healthcare) and discretionary wants (travel, hobbies). This categorization will help you prioritize your spending.
Prioritize Your Expenses: Focus on covering your essential needs first. Once these are accounted for, allocate funds to your discretionary wants based on their importance to your lifestyle.
Create a Budget Plan: Based on your estimated income and categorized expenses, create a monthly budget plan. This plan should outline your projected income and expenses, helping you stay on track.
Review and Adjust: Regularly review your budget plan and make adjustments as needed. Life circumstances and financial goals may change, so it’s important to keep your budget flexible.
A financial advisor can help you create a sustainable retirement budget tailored to your individual circumstances and goals. By working with a professional, you can ensure that your retirement savings are managed effectively, providing you with peace of mind.
7. Manage Debt and Expenses
Managing debt and expenses is essential to ensure that you can maintain a comfortable lifestyle in retirement. Reducing debt and controlling expenses will help you maximize your retirement income and savings. Here are some tips to manage debt and expenses effectively:
Pay Off High-Interest Debt: Prioritize paying off high-interest debt, such as credit card debt, as soon as possible. Reducing high-interest debt will save you money in the long run and free up more funds for your retirement savings.
Consolidate Debt: Consider consolidating your debt into a lower-interest loan or credit card. This can simplify your payments and reduce the overall interest you pay.
Reduce Expenses: Identify areas where you can cut back on expenses. This might include downsizing your home, reducing discretionary spending, or finding more cost-effective alternatives for your current expenses.
Create an Emergency Fund: Establish an emergency fund to cover unexpected expenses. Having a financial cushion will help you avoid going into debt when unforeseen costs arise.
Review and Adjust: Regularly review your debt and expenses and adjust your plan as needed. Keeping a close eye on your financial situation will help you stay on track to meet your retirement goals.
A financial advisor can help you develop a comprehensive plan to manage debt and expenses, ensuring a sustainable retirement income. By working with a professional, you can create a strategy that aligns with your retirement goals and provides financial security.
By following these steps and seeking professional advice, you can take control of your financial future and enjoy a comfortable, stress-free retirement.
6. Reviewing Investments & Asset Allocation
An essential part of retirement planning is reviewing your investments and asset allocation. Take a closer look at your investment portfolio to ensure that it aligns with your risk tolerance and goals. Additionally, consider paying down various types of debt, including student loan debt, to effectively manage your finances before exiting the workforce.
Consider diversifying your investments to spread the risk across different asset classes. This can help protect your portfolio from market volatility. Make adjustments based on your risk tolerance and the time remaining until retirement. Regularly rebalance your portfolio to maintain your desired asset allocation.
When reviewing your investments, it’s important to analyse the performance of individual assets within your portfolio. Look for any underperforming assets and evaluate whether they still align with your investment strategy. Consider reallocating funds from underperforming assets to those with better growth potential.
Furthermore, monitor economic trends and market conditions that may impact your investments. Stay informed about global events, interest rate changes, and industry developments that could influence your portfolio’s performance. Being proactive and staying informed will help you make well-informed decisions about your asset allocation.
7. Think about Downsizing as an Opportunity
A few years ago, the government made downsizing a lot more attractive. It allowed every person who sells their home over the age of 55 to make a one-off $300,000 tax-free contribution per person to superannuation. It’s called the downsizer concession, and it’s the easiest way to get a large lump sum into superannuation before retirement.
If you’re part of a couple, the concession is per person, so as a couple, you could get up to $600,000 into super in one hit. When tied up in your family home, such funds would not achieve a compound investment return that you could use to pay living and leisure expenses in retirement.
Once in superannuation and invested well, they can start to work for you, again leveraging the power of time and compound interest. If they grow at 7-10 per cent a year, they can double in value in the 10 years between ages 55 and 65.
Obviously, these are very general suggestions and there are plenty of other things you can do with good personal financial advice. But if you think about these four things 10 years before you think you might like to retire, you’ll be well on your way to an epic retirement.
Seeking Professional Financial Advisor Advice
As retirement approaches, consider consulting with financial advisors specializing in retirement planning. A professional can help you navigate complex financial decisions and provide personalized advice based on your unique circumstances.
Discuss your retirement goals, current financial situation, and any concerns or questions you may have. A financial advisor can help create a comprehensive retirement plan that considers tax considerations, investment strategies, and risk management.
It’s important to note that retirement planning is not just about saving money; it’s about ensuring that your money works for you efficiently. A financial advisor can help you optimize your retirement savings by exploring different investment opportunities and retirement accounts that align with your goals.
Furthermore, a financial advisor can help you understand the various retirement income sources available to you, such as Social Security benefits, pensions, and withdrawals from retirement accounts. By maximizing these income streams and coordinating them effectively, you can create a sustainable income plan for your retirement years.
Take Control of Your Financial Future with Delta Financial Group
As you prepare for a fulfilling retirement, having a trusted partner who can guide you through the complexities of retirement planning is crucial. At Delta Financial Group, we understand the importance of creating an income for life and putting you in control of your financial destiny. Our team of experts is dedicated to providing you with personalised advice, innovative strategies, and the tools you need to manage your money confidently. Don’t leave your retirement to chance. Book a complimentary strategy call with Mike today, and let us help you optimise your finances for a future that’s as rewarding as it is secure.
