How to plan your retirement by YourLifeChoices

How to plan

your retirement ISSUE 1

.95

OCTOBER 2015

Your step-by-step retirement guide Retirement income AGE Pension living costs budget spending RETIREMENT RIGHTS Super Downsizing transition assets test and more...

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What is retirement and how has it changed?

etirement is considered to be what you make it. But the situation for many will be what you can afford to make it. There has, however, been a discernable change in retirement – a change that can best be described as a move from ‘old’ retirement to ‘new’ retirement. In old retirement, most Australians reached 65, departed the workforce, spent what little super they had and claimed an Age Pension. They usually owned their own home outright and their children had long since flown the nest. They lived a frugal life, to be sure, but often managed their funds well. New retirement is a whole different ball game. You’re more likely to work until you’re closer to 70, be responsible for funding your own retirement through superannuation, and, more than likely, still

have a mortgage on your home, personal debt and maybe one or two adult children still living at home. However, with longevity kicking in, projections suggest that roughly the same proportion of baby boomers (67 per cent) as today (70 per cent) will be living on a full or part Age Pension. As old retirement recedes, new retirement brings a whole host of other issues for pre-retirees. But it also gives you the chance to have more say in your later years by planning as early as you can. Retirement planning can seem onerous, complex and bewildering. But we’re here to help. YourLifeChoices How to plan your retirement aims to give you the up-to-date and independent information you need to make your retirement the one that you want.

Contents DIY retirement planning Five steps to guide you to your ideal retirement lifestyle

Are you ready to retire? Take our quick quiz to find out if you’re set for the next stage

Ready, steady, plan … Start the countdown to retirement

How much is enough? Will you out live your nest egg? Learn how to make sure you do

50 questions to ask a planner 10 Ask these questions to find the best planner for you How to make the transition Making emotional – not just financial – adjustments in retirement is essential

Ages and stages What can you do between the ages of 50 and 75 to retire well?

Retirement income 14 Various income stream products exist – what will best fund your retirement? Will you get an Age Pension? 15 These four factors will influence your eligibility to receive an Age Pension To downsize or not? This is one of the questions in retirement. Do any of these four options suit?

How much do you have? 18 Use our asset and liability checklist to assess your financial wellbeing Five worst financial planning mistakes Learn from these top five mistakes so that you don’t find yourself in strife

Free resources Our top eight resources for all things retirement

14 16

YourLifeChoices How to plan your retirement October 2015

DIY retirement planning Plan your retirement using these five steps to guide you to your ideal lifestyle – no, it’s not all hard work.

ust over half of Australian pre-retirees have started formal retirement planning. This means that a sizeable proportion of 45–64-year-olds are in denial about this important life stage. A deep lack of trust in financial planners is one reason and a hope that ‘she’ll be right’ is another. With most retirement planning information full of references to going grey and becoming dependent, as well as clichéd photographs of grey-haired couples walking hand-in-hand on the beach, it’s little wonder so many are disengaged in this process. How does this affect you? If you're feeling fit, healthy and happy to work for a few more years at least – can't your retirement planning wait? No, it can’t. It would be a mistake to allow these out-dated notions of retirement planning to turn you off. Research shows that those who plan early and include social interaction, intergenerational connections and life-long learning will enjoy productive later lives. But this won’t just happen. The good news is that it's not all hard work. When retirement planning is viewed as life planning, it becomes a challenging, but also a fun and fulfilling task.

Goals for your next life stage Positive planning is based on the recognition that leaving full-time employment is a great opportunity to enter a new and rewarding life stage. It's all about starting, not stopping. Until now you may have been working, paid or unpaid, to fulfil obligations to other people, or to pay off a mortgage, raise and educate children and put food on the table. Now it’s your turn to tackle those fulfilling life goals you've always longed to achieve, but have been simply too busy to contemplate.

It's not about the money, yet … Income streams, superannuation and tax are all important. But there is no point in putting the cart before the horse. Until you know what you plan to do when you leave work, how can you successfully anticipate what type of income you will require? And until you assess how you really want to spend your 4

time, you won't have a clear idea of the associated living expenses. To plan successfully, you will need to: • clarify your roles, responsibilities and goals • benchmark your current position • convert your goals into a plan • convert this plan into achievable steps.

You're not alone Not knowing how you might fill 50 hours a week if you cease full-time work too abruptly can be a major issue. This is why a staged transition to retirement is usually the best strategy, such as cutting back to three days a week, and then fewer days as time and income demands change. But continuing with part-time work may not be an option for everyone who wants it. Despite the avowed skills shortage, seeking new directions can also be frightening – some people thrive upon change, while it unsettles others.

YourLifeChoices How to plan your retirement October 2015

So how do you want to spend your extra time?

Time to get SMART

First, you need to know yourself. So take time to ask yourself what sort of roles you currently fill. What's good, bad, or just okay about your existence? Where would you prefer to be in five years' time? And, if you had more spare time, how might you change your emphasis to achieve a higher sense of satisfaction?

Applying the SMART test to these goals is your next step. Each goal needs to be: • Specific • Measurable • Achievable • Realistic • Time-bounded

First, you need to know yourself.

Goals that conform to these five points are usually reached. Those that don't are likely to remain dreams, rather than reality.

Your goals in retirement Next, list 10 goals you really want to achieve during the first five years as you transition into retirement. They might include enhanced personal relationships, improved health, intellectual pursuits, sport and fitness endeavours, and business or career ambitions. They might be extremely ambitious (start a new franchise business) modest (tidy desk) or in-between (complete a workplace training course). It doesn't really matter. What matters is to find 10 things that will thrill your soul while ensuring your ongoing social connection. Then commit these goals to paper, prioritising them from most important to least.

When your goals satisfy the SMART criteria, then alongside the other life-planning detail you have recorded, you will be able to predict with a degree of accuracy what a regular weekly timetable in your (semi?) retirement might look like. Fill in a weekly plan to reflect the different activities you have listed, bearing in mind the balance of work, fitness, mental, relationship and spiritual activities that will give you the best life balance. Don't forget some timeout, to recharge the battery. Now you’re in great shape to take our ‘Are you ready to retire?’ quiz on the next page to see if you are truly ready to take the leap.

YourLifeChoices How to plan your retirement October 2015

Are you ready to retire? Take our quick quiz to see whether you really are ready to retire. Your answers may surprise you.

t’s easy to believe you will have to work until you drop, and that a well-earned retirement is slipping beyond your reach. But that doesn’t necessarily need to be the case. Those who plan early usually achieve an enjoyable and successful transition. This quick YourLifeChoices 20-question quiz will help you to see how ready you are for retirement. Answer ‘Yes’ or ‘No’ to the following questions, in each category:

Yes

Activities

Relationships

1. H ave you researched what you plan to do? 2. H ave you included a work component in the mix? 3. D o you have activities that make you feel of value, apart from your day job?

15. Do you have close relationships? 16. Have you shared your retirement plans with your partner/nearest and dearest? 17. Are you in agreement?

Purpose

18. Are you in good physical health? 19. Are you getting regular (three times per week) exercise? 20. Is your mental health positive?

4. D o you know what your retirement will look like? – i.e. have you considered how you will structure your week? 5. Do you have specific goals? 6. A re you mentally able to ‘leave’ work? 7. A re you leaving because it’s what you want? 8. Is this your own decision?

Money 9. D o you know how much weekly income you will receive in retirement? 10. W ill your savings be sufficient to lead a reasonable lifestyle? 11. H ave you discussed this with an accountant, financial planner or another financial specialist? 12. D o you know whether or not you will be entitled to an Age Pension? 13. C an you afford to remain in your current home? 14. H ave you considered a transition into retirement (e.g. part-time work, parttime play)? 6

Wellbeing

How did you go? If you answered ‘Yes’ to 14 or more questions, your transition to retirement is well underway. ‘Yes’ responses to 10–14 questions means you are moving toward a happy post-work life, but need to further address the questions to which you answered ‘No’. A ‘Yes’ to 10 or fewer questions means you have given little consideration to the later years of your life; now is as good a time as any to consider the big picture aspects of life after 50. And it’s not just about quantity, the quality of your responses is important as well. Apart from assessing your overall score, consider your responses to questions 4, 15 and 17. These are critical considerations for those contemplating leaving full-time work – and if you haven’t answered ‘Yes’, then do yourself (and those around you) a favour and stay at work until you can!

YourLifeChoices How to plan your retirement October 2015

Ready, steady, plan … Whether you’ve got five, three or one year to go before you retire, you can still plan your retirement and recoup the benefits.

ven if planning isn’t your strong suit, there are some pre-retirement milestones that shouldn’t be missed. So, on your marks …

• Consider reducing the hours you work and so you can become used to having a little more free time. • Use the ASFA Retirement Standard to define how much you need for the lifestyle you want and compare it with your projected income and expenditure.

Five years to go: • Think about the date that you want to retire and mark it on the calendar. • Discuss with your family how you will spend your time in retirement. It’s important that you and your significant others are on the same page. • Complete the How much do you have worksheet on page 18 to get an idea of where your finances sit.

• Visit a financial planner and get to grips with the key strategies that can boost your retirement funding.

• If home is where the heart is, consider where you want to live in retirement. Downsizing sooner rather than later often makes sense.

• Review all your insurance policies and consider which ones you need to keep or increase, and which ones can be stopped altogether.

• Get things in order by collating all your paperwork, making a will and appointing the necessary executors, power of attorney, etc. • Review your health insurance – do you have sufficient cover? Or can you afford cover at all?

• Will you get an Age Pension? Rules may change by the time you retire, but it’s useful to familiarise yourself with the current legislation.

Three years to go: • It’s time to set your retirement date in stone and begin to work toward that goal. • Request an up-to-date superannuation balance and forecast from your fund and check with your financial planner if you are still on track to meet your target.

One year to go: • Start setting your retirement income wheels in motion with your financial planner. • You can apply for an Age Pension 13 weeks before you reach qualifying age, so complete the application as soon as you can. • Finalise your retirement budget and spend the next year sticking to it. If you need to tweak it, do so, but remember, increasing costs means reducing your savings. • Have a full medical check up and address any issues that are concerning you. You’ll need to be fit to maximise your fun in retirement.

YourLifeChoices How to plan your retirement October 2015

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Make your super work for you

any Australians approaching retirement are faced with a critical question: “Will my super last as long as I do?”

There are options that may help maximise savings and provide a steady income in retirement – helping you enjoy the lifestyle you want. Some retirees are still withdrawing their super as a lump sum. While it may look great in your bank account initially, over time this can raise challenges: • you need to manage your money so it lasts throughout retirement (in conjunction with the Government Age Pension if eligible) • you may also need to ensure the money generates a decent return and provides a regular income. This may take effort and planning – especially if the economy is volatile! AustralianSuper has an online tool to help you find out what your retirement income could be, and help ensure your money keeps working for you into the future.

Make the most of your super A product to consider for retirement is an AustralianSuper Choice Income account. This account converts your super into regular income payments when you retire, allowing you to decide on the amount, and the frequency you’ll receive payments based on Government prescribed limits.

Benefits can include: • take out a little extra whenever you need it • choose how much you want to be paid and how often* • continue growing your super with strong long-term returns† • save on tax – your super becomes a tax effective income stream once you turn 60 with a Choice Income account.

Top up the Government Age Pension For some, super alone may not be enough for an adequate retirement and will require the support of the Government Age Pension (GAP). Use a Choice Income account to top up any GAP payments you may be eligible for, leaving you more to spend. Visit australiansuper.com/income to find out what your retirement income could look like. 8

There are many options to consider as you head into retirement. But with proper planning, it’ll be that much easier. Visit australiansuper.com/yournextlife to learn more. This article was prepared in October 2015 and contains general financial advice which does not consider your personal situation or needs. Before deciding if AustralianSuper ABN 94 006 457 987, AFSL 233788 is right for you read the PDS at australiansuper.com. *Government prescribed minimums and maximums apply. †Investment returns are not guaranteed as all investments carry some risk. Past performance gives no indication of future returns. Check Centrelink for Government Age Pension eligibility.

YourLifeChoices How to plan your retirement October 2015

How much is enough? Or perhaps more importantly, will your money last? And does the answer mean you need to stick to a fixed budget?

s Australians are now, on average, living longer, superannuation needs to stretch even further to cover living expenses in retirement.

You have a 50/50 chance of living as long as your life expectancy and in some cases, it may even be exceeded. For most Australians, retirement income is a combination of superannuation and the Age Pension After considering the many ways you may wish to make the most of your ‘second life’ after full-time work, you should have a clearer vision about your future lifestyle needs. The next, critical question is: How much money will you need to make it a reality? This is a smart question to ask early on, because the fact is that most people don’t have enough on which to retire. The most recent Association of Superannuation Funds of Australia (ASFA) Retirement Standard (June quarter) found that the average annual income required to facilitate a comfortable retirement is $42,861 for a single person. According to many recent reports, $1 million is being quoted as the magic figure – a figure that is genuinely frightening for those who have no hope of ever saving this amount, but there’s no need to panic. Recently, AustralianSuper Chief Executive Ian Silk commented: The Super Reality Check paper released by the Australian Institute of Super Trustees and

AustralianSuper shows a person on a wage of around $80,000 who spends their whole working life with the superannuation setting of 12 per cent – which is legislated to be reached by 2025 – can expect to retire with around $550,000 (in today’s dollars) in superannuation savings. Combined with a part pension, this has the potential to provide a single homeowner with an adequate retirement income of around $31,000 to $40,000 a year depending on the drawdown rate chosen by the individual. Perhaps the most critical point is not how much you are saving, but how well you can stick to a rigid post-retirement budget? In the example above, the individual will see a halving of their pre-tax income. So practising cutting back before retirement is a key strategy.

How long will your money last? The question that is perhaps more important is how long does it need to last? Answering this question is easier said than done. For example, if you’re planning to retire at age 65, the research suggests that you’re likely to live for approximately another 20 years. The average Australian woman at age 65 has a life expectancy of about 87 years and the figure for Australian men is about 84 years. This is based on the 2010-12 life expectancy tables (ABS Feb 2014).

YourLifeChoices How to plan your retirement October 2015

50 questions to ask a planner Find out if your chosen financial planner fits the bill by asking him or her the questions that matter.

hile 50 questions may seem like a lot to be asking a financial planner, you really can’t have too much information to hand when making a decision on whether or not this is the right person to manage your money. Starting on the right foot with a financial advisor can also help ensure that you get the most from this important relationship.

Checking your investment options 11. How does a managed fund work? 12. How long should I keep my money invested? 13. I’ve paid off some or all of my home loan and have surplus income every month. Can I use this to build an investment portfolio? 14. How much do I need to start an investment portfolio? 15. When is the best time to start investing? 16. How do I know what level of risk is suitable for me?

You really can’t have too much information. 17. How can I reduce the risk of losing my money? 18. What is the long-term benefit of adding money regularly into my investments?

Starting your meeting These are the most important questions you can ask a planner, and if he or she is not comfortable answering, or seems evasive, then it’s smart to ask why.

19. Is it better to put extra money into my home loan to pay it off or into managed investments? 20. Can you show me how to pay off my mortgage sooner? 21. What is the difference between growth and income investments?

1. Do you operate under a licence owned by a financial planning group or bank, or are you independent?

22. Will I be charged a fee if I withdraw money from the managed fund you recommend?

2. What qualifications or experience do you have?

24. What are the benefits and risks of gearing, and would it be appropriate for me?

3. Are you licensed to give financial advice? 4. May I have a copy of your Advisory Services Guide? 5. What can I expect from this meeting? 6. What fees do you charge? 7. Do you receive any incentives apart from fees?

23. Can you highlight any tax-effective investments?

25. Apart from investments, on what else do you provide advice? 26. Where can I find information about alternative investment products? 27. Can you help me invest directly in shares?

8. Can you give tax advice?

Performance and taking returns

9. What if I have concerns about the outcome of this meeting?

28. How can I track the performance of my investments?

10. What information is held on my file and what do you do with it?

29. What ongoing information will be given to me about my investments?

YourLifeChoices How to plan your retirement October 2015

30. How has the recommended fund been performing over the medium to long term?

42. How do I know if I will have enough money to retire?

31. Can you tell me the types of investments in which the fund invests?

43. How can I structure my investments to make sure that I have enough to live on in retirement?

32. Who manages the fund, how long has it been operating and how big is it?

44. What happens if I die â&#x20AC;&#x201C; have I got the right instructions in place to ensure my wishes will be followed?

33. Should I reinvest my returns or take the income from my investments?

Taking the mystery out of superannuation

45. What tax will I have to pay when I remove funds from my super account? 46. Am I able to structure my retirement income so I can still receive social security entitlements?

34. What are the benefits of investing in super?

Making sure you have the right insurance

35. How can I contribute to my super? 36. Am I putting enough money into super? 37. How do I know that my super is invested wisely? 38. Should I consolidate my super into one fund? 39. Should I consider a Self Managed Super Fund (SMSF)? 40. Why/why not?

47. Can you calculate and recommend how much cover I should have? 48. If I become sick or injured and cannot work what type of insurance would cover living expenses such as mortgage repayments? 49. Can you help me make provisions for my family should I become disabled, get sick or die?

Getting ready to retire 41. When should I start planning my retirement?

50. How do I know if my superannuation includes insurance?

YourLifeChoices How to plan your retirement October 2015

How to make the transition Have you ever wondered how you will transition into retirement? Find out how to do so – both emotionally and financially.

ransitioning to retirement is really a doublepronged process: as many emotional issues are associated with a major life stage such as retirement as there are financial. It’s not as simple as flicking a switch and getting on with an entirely new life. It does require some planning and this is best done in conjunction with your nearest and dearest. Taking our Are you ready to retire quiz? on page six will give you an indication of the areas in which you need to give more consideration before making the decision to start your retirement. The other part of transitioning is the financial aspect that allows you early access to super savings. This is known as a Transition to Retirement Pension (TTP) or TTR strategy. When you can start such a pension depends on your preservation age, which is determined by your year of birth, but the earliest is 55 years of age. Date of birth

Preservation age

Before 1 July 1960

1 July 1960 – 30 June 1961

1 July 1961 – 30 June 1962

1 July 1962 – 30 June 1963

1 July 1963 – 30 June 1964

From 1 July 1964

Retirement is an adjustment; not something you wake up to one morning. While some may have the timing forced upon them due to retrenchment or ill health, more often than not, it’s about easing into a different way of life. How far in advance you start to make the transition often depends on your finances, whether you can take advantage of a TTP and what work options are available to you. A TTP is the most common way to start to reduce your working hours, while maintaining your income and growing your super balance. But it’s also important to understand that you will, most likely, have to live on less money. This may mean downsizing, closely examining your household budget and accepting that large purchases and overseas holidays will become less frequent than you ideally would prefer. It’s also vital that you remember this decision may not be yours alone. If you have a partner, then you will need to ensure that you’re both on the same page. Your relationship can change considerably when you have more time to spend at home or less discretionary income, so having the support of those closest is the first step to a successful transition. Don’t underestimate how important it is to envisage the type of retirement you hope to have to remain informed about the changing rules of retirement.

YourLifeChoices How to plan your retirement October 2015

Ages and stages

Find out what you can do between the ages of 50 and 75 to ensure your retirement is a successful one.

part from the already mentioned emotional prerequisites, the cornerstone to planning and achieving a successful retirement is to maximise the financial advantages available to you. These happen at different ages from 50 onwards, so let’s take a look at these moneyoriented milestones.

Age 50 One of the most tax-efficient ways to save for retirement is superannuation via concessional contributions, which includes employer super guarantee contribution (SGC) and salarysacrifice payments. For people aged 49 or over on 30 June, the current limit for concessional contributions is $35,000. These contributions are typically only taxed at 15 per cent, rather than your marginal tax rate, making this a very tax-effective form of saving.

Age 55 At this age, you may have already reached, or are very close to, your preservation age, which is determined by your year of birth. This is when you can potentially first access your superannuation, even if you are still working. This strategy is called Transition to Retirement (TTR). Basically, a transition-to-retirement plan involves using part, or all, of your accumulated superannuation fund to start a pension. However, this pension – often termed an income stream in the financial industry – must be funded from your existing superannuation savings.

Age 60 Depending on whether you are working full time or part time, this is the age to apply for your Seniors Card, so you can obtain discounts from thousands of businesses – and you’ll never again have to pay the full fare for nationwide public transport. Also, with retirement fast approaching, it may make sense to top up your retirement savings using non-concessional contributions that can be funded by using other savings or perhaps an inheritance.

The current annual limit for non-concessional contributions is $180,000, or you can bring forward two future years’ limits – i.e. a total of $540,000. Since this money has already been taxed at some stage in your personal name, it’s received by your superannuation fund tax-free.

Age 65–70 This is when you reach the Age Pension age, where you might be entitled to receive a government Age Pension and the associated Pensioner Concession Card. The qualifying age is currently 65 years for anyone born before 30 June 1952. This age increases progressively to 67, depending upon your date of birth. It also worth noting that 70 is the age limit for making any spouse contributions to boost your partner’s superannuation.

Age 75 If you are still working, this is your last chance to top up your superannuation via a personal super contribution or a salary-sacrifice arrangement. YourLifeChoices How to plan your retirement October 2015

Retirement income Discover what’s ‘out there’ so you can decide which type of income stream will be best to fund your retirement.

common concern in retirement is how we are going to produce an income for the rest of our lives. The main thing that we lose in retirement is the ability to earn wages and salaries. So, whether you’ve built up savings from superannuation, investment property, equity in your home, money in the bank, or an inheritance, you will need to turn this capital into an income stream that is convenient, secure and tax-effective.

Choosing a retirement income product As you approach retirement, you need to decide how to use the super that you’ve saved to help support yourself in retirement. For some, making a lump sum withdrawal from superannuation and investing in property, shares or term deposits is the preferred way to derive an income. However, for an ever-increasing number of people the answer lies in the form of income streams and, in particular, account-based (allocated) pensions and annuities. An account-based pension allows you to keep your money in the superannuation system by transferring from the accumulation phase to an account-based pension, which pays a regular income over a defined period. An annuity can be purchased from an insurance company or superannuation fund, and gives you a guaranteed income for a defined period, which can be the rest of your life. 14

Where do you go to get one? Most life insurance companies and financial services organisations provide these different types of income stream products. You can approach these organisations directly, at which point they will usually redirect you to one of their financial planning groups, or you can seek the advice of an independent financial planner or trusted accountant. It is important to always seek professional advice as these products are complex.

How do you set one up? 1. Decide on your retirement date or year. 2. Ensure that you have a clear and defined set of goals and objectives (e.g. required income per year, investment objectives, access to capital, Centrelink, etc). 3. Do your research! Most providers’ websites have additional information on their income streams. 4. Arrange an interview with an independent financial professional.

What if I have no superannuation or savings? For others with limited superannuation or savings, releasing the equity in their homes, through a reverse mortgage, is another way to fund their retirement, or at least top up an Age Pension. Find out more about equity release products.

YourLifeChoices How to plan your retirement October 2015

Will you get an Age Pension? These four factors will influence your eligibility to receive an Age Pension.

ne of the most common questions people ask when considering retirement is whether or not they will get an Age Pension. Several factors your eligibility, which are assessed by the Department of Human Services. These are:

10 years, or for several periods, that total over 10 years, which is to include a continuous period of five years. However, there are certain exemptions. You can find out more at Humanservices.gov.au.

Qualification age

Centrelink will apply both an income and asset test to determine the amount of Age Pension you will receive. You will receive the lesser amount derived from these two tests and should either of them result in a $0 payment or less, then you will not qualify for an Age Pension.

The current qualification age for the Age Pension is 65 years of age for men and women. From 1 July 2017, this will increase by six month every two years, until it reaches 67 by 1 July 2023. To calculate when you will be eligible to claim for an Age Pension, view the table below: Date of Birth

Qualifying age at

1 July 1952 to 31 December 65 years and 6 1953 months 1 January 1954 to 30 June 1955

66 years

1 July 1955 to 31 December 66 years and 6 1956 months From 1 January 1957

67 years

Residency requirements When claiming the Age Pension, you must be a resident in the country and must have lived in Australia as a citizen for a continuous period of

Assessment of income and assets

Income test Currently you can earn $162 per fortnight for singles before your Age Pension is affected. If you chose to work past Age Pension age, the Work Bonus will be applied and $250 of income from wages will be excluded from assessment. Your Age Pension is reduced by 50 cents for every dollar you exceed the threshold until your payment reaches $0. Find out full details of income thresholds.

Asset test There are certain exemptions from the asset test, such as your main residence if owned. The current asset disqualification limits for a single, full Age Pension applicant are $205,500 for a homeowner and $354,500 for a non-homeowner. Find out full details of asset thresholds. YourLifeChoices How to plan your retirement October 2015

To downsize or not?

Where you live in retirement is a dilemma many people face. So, which of these options is best for you?

etirement is not only a time of change for work and finances, it’s also when, where and how you live that needs to be reviewed.

While it’s difficult to predict what the future will hold, carefully considering your options, sooner rather than later, may stop you from making a hasty decision that you’ll regret. The need or decision to change the type of house in which you live, or where that home is located, can be driven by different factors. Start by asking yourself these questions: • Do you want to move closer to family, or is staying near your established social network more important? • Have you always dreamed of a sea- or treechange? • Or is spending extended periods on the road more your thing? Where you really want to live is the first decision you will need to make. If you decide to stay in your own home, you should consider: • Can you afford to maintain your home? • Do you need to access the equity in your home by selling or using an equity release product? • How long will it suit your physical needs? • Is it too big to enjoy, or an unnecessary drain on your income and effort to maintain? If you decide that moving would be in your best interests, ask yourself: • Which services do you need nearby? • How accessible is public transport? • Should you move sooner rather than later? • How close are you to family and friends? While many Australians are happy to stay in their own homes as they age, a growing number are considering their future needs. This can result in moving into a retirement village, particularly one that may have access to low-level aged care so you won’t have to move again. 16

What types of accommodation are available in retirement? There are numerous types of accommodation that you may consider when downsizing. Understandably, this can make things confusing. Here are the most common living options in retirement.

Your own home Ok, so this is obvious and easy, but if your own home works for you, based on your responses to the above questions there really is no need to move.

Strata unit This can be an apartment or unit that is not in a specific retirement village. Developers often build a mix of single and double level homes on subdivided land and this can be appealing to those looking for something smaller. The grounds are often communal, although you may have a small outside area and the buildings may be relatively new, so maintenance isn’t such an issue. There is often the opportunity to buy off-plan, so you can have a say in the final fitout of the home, as well as save on stamp duty. Of course, you will have to factor in body corporate fees and the fact you may not be able to do much to the outside of your home without approval.

YourLifeChoices How to plan your retirement October 2015

Over-55 apartment complexes If you’re looking for an apartment that has tenants and owners similar in age, then an over-55 apartment complex is a good option to consider. As there are no younger couples, singles or families, it is likely that there will be less noise than your traditional apartment block. Specific over-55 complexes generally also have top-level amenities, such as a pool, fitness centre and even doormen – but, of course, you pay for the privilege. You’ll also need to be sure that your relationship or living circumstances don’t change, such as a younger partner, or child coming to stay, as many have strict over-55 rules.

Retirement villages This is probably the most common type of accommodation that people consider when looking to downsize. With a selection of units, villas and townhouses, there is usually a type of accommodation that will suit your needs. A communal centre gives you the opportunity to meet with new friends and there are often many amenities you can utilise and activities you can enjoy. Accommodation can include serviced apartments and hostel accommodation, as well as independent living units, so your options are not limited. Retirement villages should not be confused

with aged care homes, although some do offer care services or the option to move to aged care facilities on site. Buying in a non-traditional setting, such as those listed above, can be complex, as there are often different rules that apply. Some contracts will give you the right to occupy, whereas others are an outright ownership and some titles will give you ownership to a defined portion of land. You may also be restricted when it comes to selling your property should you need to.

Where you really want to live is the first decision you will need to make. Legislation that applies to retirement village and property contracts differs between states. You should check carefully which legislation applies to your purchase and always seek independent legal advice. Before entering a retirement village, you may wish to contact its specific residents’ association to find out more, particularly in regards to deferred management fees (DMFs).

YourLifeChoices How to plan your retirement October 2015

How much do you have?

e often think that we are across the value of our assets and liabilities, but in reality we usually overlook something important. This can prove a costly mistake when assessing how much you have, and how much you owe, in order to work out your eventual retirement income.

The simple table below will give you a starting point from which you can base all your calculations and it’s useful to keep handy, update quarterly and maybe even let your nearest and dearest have a copy. You can also use it in conjunction with the Will you get an Age Pension?’ article on page 15, so that you can see at a glance if you qualify.

Your asset and liability checklist VALUE OF ASSETS

You

Your partner

Joint ownership

Family home

Contents

Motor vehicle 1

Motor vehicle 2

Boat/caravan

Other

TOTAL (A)

VALUE OF EXISTING INVESTMENTS

You

Your partner

Joint ownership

Investment property

Superannuation funds

Annuities or pensions

Term deposit(s)

Managed investments

Cash in bank

Other

TOTAL (B)

TOTAL ASSETS + (A) + (B)

C $ TOTAL JOINT ASSETS

VALUE OF LIABILITIES

You

Your partner

Joint ownership

Current home loan balance

Current Investment loan balance

Current personal loan balance

Combined credit card balances

Lease/hire purchase balance

Other

TOTAL (D)

TOTAL NET VALUE OF ASSETS = (C) - (D)

$ TOTAL JOINT NET VALUE OF ASSETS

YourLifeChoices How to plan your retirement October 2015

Five worst financial planning mistakes Rather than scare you witless by sharing the countless retirement planning mistakes that can happen, we’re only highlighting the five worst.

No defined goal It’s easy to say that your goal is saving for retirement, but unless you know what type of retirement you hope to achieve, and when you would like it to start, you won’t succeed. Your goal should include a clearly defined timeline and action points along the way. The more definitive you can be, the better chance you have of success.

Not seeking professional advice So many people either think they can easily manage their own financial affairs or that they don’t have enough in savings to warrant a visit to a planner. While you may be clever with a spreadsheet and calculator, keeping up-to-date with changing legislation can be tricky. Similarly, if you don’t have much in savings, using the correct investment methods will ensure you get the most from even a meagre amount. Read the 50 questions to ask a planner on pages 10 and 11.

Set and forget It may have been traumatic to find a planner and then have your finances picked apart, but thinking

it’s a one-off is a recipe for disaster. Investments can move up and down, your needs may change and your goals may no longer align with your lifestyle. At the very least, you should get in touch with your financial planner annually and discuss whether a review is required.

Eggs in one basket While you may think you’ve hit the jackpot with your investment choice, it’s important to acknowledge that all investments can go up and down. Share markets, property markets and even the rate of interest paid by the bank can lead to some volatile returns. By diversifying your risk, it can also be minimised.

It’s never too late Even if you’re staring at retirement down the barrel of a gun, it’s never too late to seek some planning advice. Circumstances change and that means what you had previously believed to be true may no longer be the case and you may risk losing your hard-earned savings or, worse, missing out on an investment windfall.

YourLifeChoices How to plan your retirement October 2015

free Resources

hile it’s important to have as much information to hand as possible when making decisions that will affect your retirement, it’s equally important to ensure that the resources you use are factually correct, comply with legislation (such as financial services legislation) and are easy to use and understand. Here are eight of our favourites: 1. Your retirement and the Age Pension Each quarter, YourLifeChoices updates the relevant income and asset thresholds, pension payment rates and changes to legislation that may affect your Age Pension eligibility. This information is then published in Your retirement and the Age Pension, an electronic magazine which is available to our members to download free of charge. 2. Retirement Update Keeping up to date with all the information you need in retirement can be tricky. So each quarter, in our Retirement Update, YourLifeChoices brings together all the news, tips and financial know-how you need to ensure a successful retirement. 3. Moneysmart.gov.au Published by: Indigo Arch Pty Ltd Publisher: Kaye Fallick Editor: Debbie McTaggart Assistant Editor: Lesh Karan Designer: Word-of-Mouth Creative Phone: 61 3 9885 4935 Email: admin@yourlifechoices.com.au Web: www.yourlifechoices.com.au All rights reserved, no parts of this book may be printed, reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, recording or otherwise, without the permission in writing from the publisher, with the exception of short extractions for review purposes. IMPORTANT DISCLAIMER No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publication is distributed on the terms and understanding that (1) the publisher, authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, financial, professional or other advice or services. The publisher and the authors, consultants and editors expressly disclaim all and any liability and responsibility to any person, whether a subscriber or reader of this publication or not, in respect of anything, and of the consequences of anything done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no publisher, author, consultant or editor shall have any responsibility for any act of omission of any author, consultant or editor. Copyright Indigo Arch Pty Ltd 2015

As well as useful advice on money matters, this government-funded website offers several useful calculators including budget, debt and mortgage calculators. 4. Retirement Income tool AustralianSuper’s ‘Retirement Income tool’ will show you how an income from super can be combined with the Government Age Pension. See the difference it can make. 5. ASFA Retirement Standard Find out each quarter how much income you will need to receive to live either a modest or comfortable lifestyle, according to your relationship status. 6. Your Rights at Retirement The Australian Human Rights Commission (AHRC) prepares this practical handbook, which can be downloaded free of charge. 7. How long will you live? If you want to know how long a life you need to prepare for in retirement, this longevity calculator may give you an indication. Of course, how long you live depends on many factors that can’t be analysed by a simple calculator, but it’s a good starting point. 8. Centrelink Rate Estimator If you would like to know how much Age Pension, Newstart Allowance or other Centrelink benefit you may receive, you can use this Rate Estimator to give you an indication.

YourLifeChoices How to plan your retirement October 2015