A census conducted in Sydney in 2016 shows that Greater Sydney has a total workforce of 2.2 million, representing 20.7% of the total national labour force. There is no fixed retirement age in Australia, but reports show that the average retirement age in Sydney is 55-60 years. Many retirees depend on pension as their source of income post-retirement. But, with the rising inflation and the cost of living in cities, that might not be enough for people to enjoy their retirement and put their travel plans into action. Retirement planning may be a daunting task, but it is an important aspect of financial planning. Consulting the best financial advisor Sydney has to offer is sure to make the process easier and more organised.
Here’s a short guide covering the crucial aspects of retirement planning to ensure that all the readers get the comfortable retirement they always dreamt of.
Understanding The Retirement Needs
The first step to financial planning is to be clear about one’s economic standing and the goals one has for their future, including retirement. The person must determine the lifestyle they hope to have post-retirement and the cost it would entail. This will help them track their expenses and give a clear idea about how much they have to save during their earning years to lead a comfortable post-work lifestyle. Knowing the risk tolerance, cutting down on costs, liquidity preference would be included in the retirement planning timeline.
Weigh All the Options
The effort put into planning for retirement must make money go the distance and not end abruptly. The most popular strategy that financial advisors suggest is superannuation. This is because all the investment returns within a super have a taxation policy at a maximum of 15% during the accumulation period and 0% during the retirement period. The government also provides tax deductions and tax-free pension income through a super. Other income options include annuity, account-based pension, Age Pension, government benefits, senior concessions, lump sum amount or a combination of these.
Diversify the Income Through Investment
Along with government-based income, investment forms a major stable source of income after retirement. There are multiple investment options available depending on one’s income, risk tolerance, and goals, including property and shares. Investment in property acts as a tangible asset and offers a stable income through rents for those who have a low-risk tolerance. Those looking at a higher return-higher risk process can invest in shares and mutual funds early on. The structure of the portfolio, the investment assets affect the returns and one’s lifestyle. Hence one must consult a professional financial advisor in Sydney who can help make sure that the choices are right.
Consider the Debts
Debts can come in various forms like mortgages, personal debt, investor debts, student loans and credit cards. It is crucial to understand that all debt is not created equally. Debts fall under two categories: good debt and bad debt. Good debt refers to the debt incurred from a strategy to accumulate long-term wealth. It is usually associated with equity building or revenue-generating assets, like investing in a property. When managed well, these generally provide good returns, in the long run, alleviating the debt. Bad debts diminish the wealth in the long run and do not generate any revenue, for example, credit card debt. Having bad debts closer to retirement is not a good sign.
By consulting a reliable financial advisor, one can discuss debt recycling and weigh the pros and cons of different retirement planning strategies and stick to the one that satisfies their needs.