7 questions to ask yourself before you retire

Sep 30, 2021
Retirement will be easier once you consider these seven questions. Source: Getty

Retirement should be a time in your life where you feel secure, comfortable, and happy after a lifetime of work. However, sometimes the transition into retirement isn’t always smooth sailing; particularly since the pandemic put pressure on older Australians to retire sooner. 

Whether you have existing debts or need financial advice, there are many crucial questions you should ask yourself before stepping into retirement. So here are seven questions to consider before making the move to your next stage of life.

Seven questions to ask before you retire

How much money will you need?

According to the Australian Super Fund Association (ASFA), older Australians are likely to support a modest retirement lifestyle with the current age pension, especially after millions of pensioners ended up benefitting from a payment increase. Individuals and couples looking to retire with the basics could do so with annual savings or a superannuation balance of $28,254 or $40,829 if you’re a couple. 

However, if you want to live comfortably, a couple will need $62,828, and individuals will need an annual budget of $44,412. A comfortable retirement will require a superannuation balance of $640,000 and $545,000, respectively.

Where will the money come from? 

The money you use for your retirement will likely come from a few different income sources, with the main one being your super fund. You should know the exact amount of money in your super fund before planning so you know how much money you are entitled to during retirement. 

You can also receive money from investments, savings, inheritance, and government benefits; depending on your circumstances. 

Do you have an emergency fund? 

Having an emergency fund is crucial even before retirement. No matter how well you plan for your retirement, life can still get in the way, and you should always have some spare money to fall back on. An emergency fund for retirement is essential for unexpected costs, like health insurance or last-minute home renovations. An emergency fund makes sure you don’t need to sell assets or create a new debt to cover them. 

What’s on your to-do list? 

Knowing what you want to do in your retirement will ensure that you can plan and budget accordingly. You should consider your social life and recreation, travel plans, staying active and healthy, different retirement living options, and helping any kids you may have. 

How much debt do you have?

Unfortunately, many Australians rack up quite a bit of debt throughout their lifetime, whether it’s from failed investments to credit card debt. Taking care of any debt you may have before you head into retirement is crucial, as you don’t want your debt (particularly with high-interest repayments) to eat away the money you will be now living off. 

How can you withdraw your super? 

You can access your super fund between the ages of 55 and 60 through four methods of withdrawal. You can either: 

  1. Transition to a retirement pension, which is regular payments whether you continue to work full time, part-time or casually. 
  2. Transition to an account-based pension, which offers regular payments while being fully retired. 
  3. Transition to an annuity service, which provides you with guaranteed payments over a set number of years. 
  4. Take your super savings as a lump sum, which allows you to take your entire super and place it into your savings account. 

Are you emotionally ready to retire? 

The last and arguably the most important question you should ask yourself is if you are emotionally ready to retire. Retirement can be daunting, and you need to be 100 per cent ready, with a plan and budget to live comfortably. The huge shift of no longer having a job and not knowing how to fill your days is a new challenge you will face in retirement that may seem daunting at first, but if you plan ahead, just know everything will be alright. 

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.

Are you retired? What was your experience like?

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