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Retirement Planning

Retirement planning is about prudent investment to help people lead the lifestyle of their choice in retirement. For some people, the goal for retirement is a sea change. For others, it is accumulating adequate resources to help their children. Whether they have sufficient money for retirement is an issue for most people. This will impact when they can retire.


Whatever the goal, good retirement planning should ensure that investments, including allocation of assets, are appropriate to a retiree's need in tax-effective structures. It should consider ways to maximise social security benefits, and the value of both superannuation and non-superannuation assets.


Stages of Retirement Planning


Retirement planning has two stages. First, it is the accumulation and protection of wealth to provide income and financial security in retirement. For many people, wages (and the ability to earn wages) provide income and financial security during their working lives. Both are lost at retirement. Once wealth is accumulated, the second stage of the retirement planning comes into play: retirement. During retirement, the income previously received from employment has to be replaced by income drawn from the individual's savings. Social security provides some income in retirement for those who are unable to self fund their retirement. However, this is generally insufficient as a sole source of income for many people.


Retirement planning is best seen as a rolling program rather than a one-off event. Changes in legislation and changes in circumstances make it necessary to regularly review the retirement plan within each stage and, where appropriate, update the plan so it continues to be effective and relevant to the client's objectives.


Stage 1: Wealth Accumulation

The first stage of retirement planning is the employment savings and wealth accumulation phase. It generally begins when someone commences work, as superannuation contributions are compulsory for most employers. Employees and self-employed are also encouraged to contribute to superannuation through voluntary contributions which can attract tax concessions.


Many people also have in place savings and investment plans outside superannuation. The combination of superannuation and non-superannuation assets provides as well-balanced portfolio to meet long, medium and short-term savings goals.


Changes in employment bring important wealth accumulation decisions that will impact on retirement planning. The investment of payouts from previous employment (such as leave payments, employment termination payments) and the tax implications should be managed carefully.


Stage 2: Retirement


The retirement stage concerns wealth protection and spending with a focus on ensuring a steady income stream throughout retirement. Decisions are made on how to invest superannuation benefits to meet lifestyle needs. In addition to financial needs, consideration should also be given to non-financial goals such as hobbies.


In the early years of retirement, retirees are generally very active, but as they age they may scale back their more expensive leisure pursuits and they may experience higher medical costs and costs associated with care. Access to public health facilities helps to control costs and retirees may qualify for concessional entitlements. It is important to ensure that estate planning issues are reviewed and updated regularly.


Reference: Superannuation and Retirement Advice, FPC003, Kaplan Higher Education 2018.

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Licensee Disclosure:

Todd Burnell

Senior Financial Planner/Director

Silway Pty Ltd TA Silway Private Wealth

Authorised Representative of GWM Adviser Services

TA MLC Financial Planning

Australia Financial Services Licensee

Registered Office at 105 - 153 Miller Street

North Sydney NSW 2060 Australia