A report conducted earlier in the year for COTA Federation found one in four people over the age of 50 and still working don’t believe they would ever retire. The survey indicated that for some, it’s for love, as work provides a purpose, while for others it’s for money, because they can’t afford to retire.
In our experience, there is usually a third group who don’t know if they can retire or not. This is because they don’t have a clear understanding of their financial position, and it causes fear (often unwarranted). In this article, we review the financial considerations that provide financial confidence and choice about when, or if, you decide to retire.
In June this year, Councils on the Ageing (COTA) published research obtained from a survey of 2,830 over 50s from all walks of Australian life.
Of the over 65s, 49% had retired, which was significantly down from the last survey conducted in 2018 when 60% were retired. However, as the survey indicates, the retirement age has since increased to 66, which may have had an impact.
Of those who were still working, 25% did not think they would ever retire – and this was slightly up from the earlier survey responses.
When I think about retirement, I have to admit I may be among those who continue to work well beyond my use-by date. This is because I’d like to think I’ll be one of those people who will give up work when I’m good and ready.
For me, it’s about purpose, the social interaction I enjoy with my team and clients, and developing financial strategy and problem solving gives the old grey matter a pretty solid work out.
No matter where you currently fall in the retirement spectrum of love vs money, there are a few practical steps you can take now to increase your certainty and financial control.
In my financial planning firm, we often talk about the five key benefits of being in financial control. They are: choice, opportunity, clarity, confidence and a whole lot less stress.
Unfortunately, for many high earning professionals, including those in the mining and resources industry, they aren’t enjoying the benefits of feeling in financial control.
Retirement planning often begins too late, typically within five years of actually retiring. By then, many opportunities have been well and truly missed for accumulating wealth, and financial strategy will be limited to making the most of what you’ve got to create a sustainable retirement lifestyle, which may not be your retirement of choice.
The key takeaway is that retirement planning needs to begin early.
Catch up your super contributions:
To make the most of super, regular contributions made earlier in an individual’s working life make sense on many fronts. Contributing to super provides a retirement savings commitment, tax efficiencies, opportunities for growth when invested well and the magic of compounding interest.
A note for business owners: these benefits are only available to you if you actually pay yourself super.
Luckily, recent changes to superannuation legislation have provided opportunity to catch up on super payments. That is, business owners (and wage and salary earners too) who may not have contributed any super or haven’t contributed to the full cap amount, may top up their super balance by the un-used portion of the cap (currently $27,500) over five years.
Non-concessional contributions of $110,000 per year can also be added to super to make the most of any surplus cash, while the 3-year bring-forward rule enables $330,000 in extra cash to be added that may have resulted from the sale of an asset or an inheritance.
Review your personal insurances:
I recently wrote an article about high income earners who readily paid their car and boat insurance, but needed convincing when it came to implementing personal insurance. If you are unable to work due to illness or injury and you have financial commitments and you do not have personal protection insurance, may I suggest you seek advice on a personal protection strategy as a priority. Your financial commitments might include school fees, debt – credit cards, vehicles and mortgage – in addition to your day to day living expenses.
Equally, for those who do have personal insurances, it’s important to review your policies, as the strategy you implemented several years ago may no longer suit your current or pending stage of life.
For business owners:
It would be a very rare case indeed for a retiring business owner to simply turn off the lights and close the door behind them.
Retirement will most likely be the final step in a long-term exit plan executed over several years. For business owners, retirement planning is a multi-disciplinary operation that should involve your lawyer and accountant as well as your financial planner. Without appropriate structures, your business could be exposed to legal claims or you could forfeit significant financial benefits, including CGT concessions that save you paying unnecessary tax. Then when you’re paid the proceeds of the sale, that money will need to be managed appropriately so that it may contribute to your future wealth and provide adequate and tax-effective income streams that will fund your retirement lifestyle.
Your first step should be to ask yourself if you actually have time in your busy schedule to attend to the three fundamentals outlined above.
If you’re a business owner, do you have time to attend to those AND implement a business exit strategy?
If your answer is no, talk to someone like me who is a qualified financial adviser (and ex-mining executive) who takes a coordinator’s role to do the heavy lifting of your financial strategy. This includes collaborating with aligned legal, tax and business advice professionals to recommend and deliver an integrated plan specific to your needs.
The next step is to identify where you’re at now. I invite you to complete our 5-Minute Financial Health Check. This will help you to self-assess and understand where you need advice. There is no obligation to proceed further than the questionnaire, however if you’d like the opportunity to talk through your health check, at no charge and with no obligation, please contact me.
To find our more, please contact Brett Cribb on +61 (0) 7 3007 2000 or email firstname.lastname@example.org
Resources Unearthed is a solutions hub that provides integrated financial, legal, property, accounting and business advisory services for executives, professionals and business owners in the mining and resources sectors.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation or needs. You should not act on it without first obtaining professional financial advice specific to your circumstances.
*Please note: For advice and services relating to this matter that are not offered under the Fortnum Private Wealth AFSL, in accordance with our collaborative advice model, when required, such matters are referred to appropriately qualified professionals.