CHECKLIST FOR RETIREMENT PLANNING

 For some, retirement is a milestone to achieve. The moment they start working, they might start financial planning for their retirement. But deciding when to retire is a difficult decision to make. If you retire early, you might end up in financial trouble like whether the amount you saved won’t be enough for retirement. Or if you retire late, you may not have the energy or health to enjoy it.

So, it’s essential to have a proper plan to ensure that you are financially stable for retirement. In Australia, retirement planning is getting into a difficult stage because of the superannuation regulations and the aging population. Hence, you need to have a secure financial planning on retire.

Here, in this blog, we will discuss the checklist for retirement planning in detail.

STEPS FOR RETIREMENT PLANNING

Here, we are going to discuss the steps to be taken for a strong retirement planning.

1. Evaluate your current budget status

Before you take any further steps to make retirement planning, the first step is to understand where you stand financially. Analyse your current budget to make sure that you have proper spending levels and try to determine what all will be the reduction during retirement.

For example when you review the net worth statement, you will have an understanding of long term goals and whether you are ready for a retirement or not.

If you are having doubts about net worth, it is the sum of everything that you own; house, car, investments. The assets that add to a higher net worth include things like home ownership, retirement savings, and investments.

As you age, hopefully, your assets increase and your liabilities decrease, leading to a debt-free state of nirvana (which we shall cover in a moment).

2. Build an emergency fund

According to research, most people cannot pull together an amount if there’s an emergency. It is very shocking that it’s a big deal and you should now determine in better ways how to use money and save money.

Prior to making any significant financial decisions, be sure you are covered in case something goes wrong. Ideally, when you are a few years away from retirement, you are not discovering the importance of emergency savings for the first time. However, now is the moment to establish one if you have managed to get this far without having a financial safety net. In the event of a personal disaster, it will protect you.

So always save an emergency fund for your future use.

3. Eliminate all your debt

In a perfect world, none of us would have any debt when we retired. In retirement, any fixed payments will start to account for a larger portion of your expenses because your income is expected to decline. If you are nearing retirement, it is time to look at the debt column of your net worth statement that we completed earlier.

So, how must one to approach their debts? Regarding where to begin, there are often two schools of thought: 1) Either by settling the loans with the lowest outstanding amount (The debt snowball approach is a debt reduction tactic in which you pay off debt in ascending order of balance, building momentum with each sum paid off.) 2) The highest interest rate obligations.

4. Decide your retirement needs

You should choose your preferred retirement plan before you can actually retire. Think about your expenses, where you want to live, and whether you want to work when you retire (it may sound insane, but many people do). In terms of how long you want to retire, try to be realistic. Even though it's hard to forecast, you can always adjust your estimate later.

5. Figure out healthcare

Healthcare will be the sector where retired people spend the most. Additionally, you need to try getting health insurance coverage. So this is another checklist that you need to take care of.

If your current employer is not willing to provide insurance, you can get insurance by yourself. Make sure your insurance doesn't lapse when you need it most, no matter what your circumstances may be. Understand your coverage's terms and conditions as well as the total amount of premiums, deductibles, co-pays, and out-of-pocket expenses that you should budget for.

6. Learn how to withdraw funds and minimise funds

Taking money out of your retirement funds to meet your requirements may seem quite terrifying, but hopefully you have been investing in them throughout your whole adult life. My biggest issue as a nerdy accountant in my first month of retirement planning in the fall of 2021 was not getting paid every month after getting paid for the previous 480 months (or 40 years)! Naturally, you will also need to know how to carry out this withdrawal procedure correctly.

By following these steps, you will be able to tick all the boxes that will lead you to a happy retirement life.