We all have an idea of when we’d like to retire, and this ‘magic number’ is very much influenced by how much super is saved for retirement.
However, sometimes life has other ideas and many people don’t get to retire on their terms. Here, we talk about how to deal with an unexpected retirement.
Retirement trends have changed in recent years; increasingly, older working Australians are remaining in the workforce for longer and delaying retirement.
By way of comparison*:
- in 2004–05, just 8% of Australians aged 45 and over intended to work until age 70
- in 2016-17, 20% of Australians aged 45 and over intended to work until age 70
There are several reasons for this, with one of the main being that many people are not financially ready for retirement. Put simply, they can’t afford to retire.
This trend is likely to continue as the retirement intentions of Australians continue to shift towards delaying retirement, with more Australians choosing to work well past age 60 (be it by choice or by necessity).
However, sometimes things don’t go to plan.
* Source: Australian institute of Health and Welfare (AIHW) https://www.aihw.gov.au/reports/older-people/older-australia-at-a-glance/contents/social-and-economic-engagement/employment-and-economic-participation
When life throws a spanner in the works
If you asked anyone how and when they’d like to retire, the majority would agree that they want to stop work on their terms, when they’re financially ready. However, sometimes we don’t have a choice about when we retire ...
According to the most recent data from the Australian Bureau of Statistics, 1 in 3 people retired for reasons completely outside their control and were not ready to retire. These unforeseen circumstances ranged from redundancy or an inability to find work, ill health or having to care for a loved one.
The most obvious impact of forced retirement is the financial impact. Having to retire several years earlier than planned means you’ve lost a few years’ worth of super contributions.
In the lead-up to retirement, many older workers contribute extra to their super in order to give their balance a last-minute boost – unexpected retirement means that these additional contributions are also lost.
Unexpected retirement can have an impact on your financial position, put a serious dent in one’s confidence and ultimately impact the standard of living in retirement.
Some strategies for dealing with an unexpected retirement
Like any unexpected life event, unexpected early retirement can be stressful and a huge adjustment. Here are four steps to take back control:
1. Take stock of your financial position
The first thing to do is get a very clear and accurate picture of how you’re placed financially. Write down your assets (which can include your savings, any income you receive from investments, such as shares or property) as well as your debts (such as your mortgage, credit cards, car repayments and any other loans).
Do you know when you can access your super? Knowing how long before you can draw down on your super will play an important role in working out how long your everyday savings will need to last you before you can access your super.
2. Work out how much you spend, and how much you need
Now make a list of your everyday expenses to see what you’re spending money on – these should include:
- energy and utilities
- phone and internet
- clothing and footwear
- health services
- leisure and entertainment
Use our Budget Worksheet to get started.
3. Now look at your super
By now, you should be getting a clearer picture of your financial situation. Next, take a look at your super account balance.
Try out the Retirement Income Calculator - it’s a great tool to provide an estimate of how much you could retire with, as well as what level of income that could provide you in retirement.
If you have reached your preservation age and can access your super, you can get an idea of how long your retirement savings could last by using our Pension Drawdown Calculator.
4. Get some sound financial strategies
If the thought of your super having to last longer than you anticipated fills you with anxiety, that’s completely understandable. And the best thing you can do is get some financial advice.
Our financial planners can help you take back control of your retirement. They can help you put together a plan and give you some options regarding pensions, including how to use a transition to retirement strategy most effectively. They can help you see the big picture in terms of social security entitlements and taxation. They can also help you work out the best way to invest your super so that it works harder for you, for longer.
They can even help you with managing your day-to-day finances and get some budgeting strategies in place.
Meet with a financial planner to get advice on:
- investing your super or pension
- budgeting and everyday finances
- tax minimisation strategies
- Age Pension and other social security entitlements
- transition to retirement strategies
- investing your pension
Call Member Services on 1800 757 607 to make an appointment with one of our planners.
The information on this page has been issued by Maritime Financial Services Pty Limited (MFS). It contains general information that doesn’t take into account your individual objectives, financial situation or needs. It’s important to consider how appropriate this general information is in relation to your situation before making an investment decision. We recommend that you seek financial advice before making any decisions regarding your super or investments. The information on this page is current at the time of publishing.