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Living Your Ideal Life
It’s no surprise that most of us spend our working lives longing for the day when we can retire and do whatever we want – wake up late, not worry about the stress of work, or travel around Australia!
But whatever you’re dreaming of, unless you start planning for when you retire early, your dream won’t come true.
Easing into retirement
The federal government has introduced the Transition to Retirement scheme to enable a softer landing for those who have reached the official age of retirement (55 for most people).
Under the scheme, you can slowly transition into retirement and the associated loss of income by working reduced hours and drawing from your super fund to supplement your income.
As you grow older and workless, the amount you can draw gradually increases; first to supplement your income and then replace it altogether.
Even if you are not quite ready to let go of full-time employment, you can use a transition to retirement strategy to free up cashflow and give your savings a real boost in the final lead-up to retirement.
Superannuation and retirement income streams
Once you’ve reached the age and stage in life when it’s time to call it quits and fully retire, it’s important to have your finances organised.
A number of different investment options are available depending on exactly what you want to achieve. The major strategy for you now is to convert all or part of your investment savings into a reliable and efficient income stream with as many tax breaks as possible.
For most people, superannuation remains the most attractive investment vehicle from a tax perspective.
At DMG, we continue to monitor and manage your retirement plan, and we update your strategies as needed to secure the best possible outcome.
Living off your investment income
A rental property is an example of an investment that generates an income stream in retirement. However, it’s important to remember that investment properties have to be tenanted in order to provide a reliable funding source.
Owning an investment property may also mean that you remain part of the tax system, and will need to prepare and lodge a return each year. Compare this with superannuation, where for those over age 60, there is no need to lodge a return.
A share portfolio can also generate solid and tax-effective income. But as we all know, the capital value can fluctuate wildly. Due care and consideration are required with your share selection, and the proportion it makes up of your total portfolio.
There is also extensive research that emphasises that ‘stock picking’ adds a layer of risk to your portfolio without adding sufficient value for that extra risk. You need to only take on risks that are appropriately rewarded.
At DMG, we have considerable experience in this area and we have taken portfolio creation and management to the next level with the DMG Diversified Portfolio. You can learn more about the portfolio here.
There’s just one important thing to note – growth investments can be held in and out of your superannuation fund. This is where tax effective planning combined with a good investment strategy is vital to secure a successful retirement.
Budgeting for a successful retirement
More often than not, your income in retirement is not going to compare with the income you had while working. Therefore, you need to make lifestyle adjustments.
We can help you plan a retirement budget that still allows you to do what you want at retirement – like that big holiday you have been promising yourself – while ensuring you have the money for your day-day expenses.
Budgeting in retirement is quite different compared to being at work, and it needs to take into account both today and the long term. Your nest egg has to go the distance.
