Back in the olden days before things like superannuation, sky-high property prices and Tiktok, planning for retirement was much simpler.
Just before you reached Age Pension age (which was 65 for men and 60 for women), your employer would put on a nice morning tea, and give you a gold watch. Then, on your birthday, you’d claim the pension and put your feet up.
Most people didn’t have much spare cash when they retired, but they didn’t need as much as today’s retirees. That’s because they didn’t live as long. Now, things are very different. There’s no common retirement date. While some people are fortunate enough to retire in their fifties, others will be slaving away at work until the grim reaper turns up.
One of the revolutions of the current century is longevity. People are fitter, healthier, more active, and likely to spend upwards of 30 years in retirement. If life expectancy keeps increasing, many people will spend longer in retirement than they did in the workforce. This means planning for that retirement – whether it’s just around the corner, or a few years in the future – is more complicated than ever before.
And while superannuation is important, there’s a lot more to retirement planning than stuffing all your cash in a super fund.
Australia’s retirement income system is based on what’s called the ‘three pillars’ of the Age Pension, private savings, and superannuation. It’s been around for a long time. And because oldies are a potent political force, whenever politicians try to meddle with it, they tend to be given the boot.
Remember when cigar-chomping Joe Hockey tried to lift the pension age to 70? That didn’t end well… for Joe Hockey. Today, the Age Pension age stands at 67, a number that’s not likely to increase for a long time.
The majority of retirees benefit from at least part-payment of the Age Pension. If you’re worried that you’ll need to be completely self-sufficient in retirement, then you needn’t be.
Today, we’re not looking at the money side of retirement – let’s save that for my next column. Instead, let’s look at some ways you can be retirement-ready ahead of time. Think of it as a practice run.
When should you start thinking seriously about life after work? I’d say about a decade before you pull the pin on a job is a good time to start. Or if your life is too busy for that, try and get things rolling five years before. That might sound like a long time, but trust me, it will be gone in the blink of an eye.
Plenty of Aussies are happy to stay in their home when they retire. But a lot of people are looking further afield, include sea changers, tree changers and those dreaming of driving around Australia in a campervan for years on end.
All those options require a different financial strategy. And if you find you don’t like living in a country cottage in Tasmania’s south, the best time to establish that is before you buy one, not after you’re retired and committed. Likewise, the grey nomad lifestyle is a dream for many. But sitting next to your loved one for hundreds of hours on a motorway can come as a shock. As can living in a tiny caravan or campervan.
My advice? Try before you buy. Take some time off work and stay in Tassie/Noosa/Hervey Bay or wherever you’re dreaming of for a few weeks or even a couple of months. You might find that thawing the dog’s frozen water bowl every morning (Tasmania) or drowning in crippling humidity (Noosa) as not what you had in mind. Trust me here, I’ve lived in both places.
And potential grey nomads would do well to hire a campervan for a couple of weeks. You’ll soon work out whether camping at footy ovals in remote towns surrounded by other grey nomads is something you’re happy to commit to.
I don’t mean that literally. I’m sure your cupboards are already pretty clean.
What I mean is start casting a critical eye over the stuff you’ve accumulated over a working lifetime. Do you really need those old golf clubs that haven’t been seen a green since the 1980s? Or the mower you’ve kept for spare parts, but never needed? Life in retirement is a lot simpler if you’ve got less stuff to worry about.
The Swedes have a word for this – Döstädning. Translated literally it means ‘death cleaning’ but the term is also used to describe the process of decluttering later in life.
Please note I’m not suggesting you give away things you need or transfer valuable assets to your children. That’s a topic in itself. But Marie Kondo, a writer who has managed to sell 11 million books, says tidying up can change your life. Who am I to argue?
You might be looking forward to a long, prosperous and healthy retirement, but your kids might have a different view. There’s a chance they’ll be expecting you to spend a decade or so helping out with their grandkids, then fall off the perch leaving a nice inheritance.
Okay, that won’t be your kids – but mixed expectations about wealth transfer do exist. The best way to avoid misunderstandings about your retirement (and death) planning is to be crystal-clear with your kids about what they are, even if that discussion is uncomfortable for them.