Opinion
Ready to sip on your super? First, tick off this pre-retirement checklist
Dominic Powell
Money EditorReal Money, a free weekly newsletter giving expert tips on how to save, invest and make the most of your money, is sent every Sunday. You’re reading an excerpt − sign up to get the whole newsletter in your inbox.
As of last year, there were approximately 3.2 million Australians aged between 50 and 59, a time of your life which – by all accounts – is a bit of a weird one. The kids are probably old enough to have moved out (or at least not be far off), and you might be thinking about taking that trip you’ve always wanted to do, or maybe even moving house.
You’re also, almost certainly, thinking about retirement. Not necessarily exactly once you hit 60, but very likely in the next 10 years after that (the average retirement age in Australia is almost precisely 65), and you’re probably starting to dream about that new caravan or boat or various other ways retirees spend their newfound time and money.
If you’re contemplating retirement in the not-too-distant future, it’s important to make sure your finances are in order.Credit: Michael Howard
What’s the problem?
But while retirement itself is a whole complex state of affairs, the years leading up to your retirement can pose some important decisions too. The way you position your finances now can have a big impact on how your retirement plays out and how well-prepared you feel for the second half (ish) of your life.
What you can do about it
So if you’re part of that 3.2 million-strong cohort, here’s a mini checklist of things you should think about before you hang up your work boots and start sipping on your super:
- Check your fund: It goes without saying that your superannuation is one of the most crucial things to be on top of before you retire, so start here. Check your fund’s returns for the last year, five years, and 10 years, and compare with other funds to make sure you’re in a good one. The government’s YourSuper comparison tool is the best way to assess this. Executive advisor at Viridian, Jason King, says pre-retirees should also familiarise themselves with the different types of super contributions you can make, and up to what age you can make them. For example, you can only make voluntary contributions until age 75, but once you hit 67 you need to meet what’s known as the “work test” if you want to claim a tax deduction on your super. If you think you might want to make a downsizer contribution, familiarise yourself with that too. This is the time to get across all the varying facets of superannuation, and if you’re feeling lost, advice from a financial planner or even your super fund can go a long way.
- Sus your insurance: By this age it’s very likely you already have private health insurance, and you might be thinking of taking out additional insurances such as life insurance or letting go of other insurances, such as income insurance. I’ve covered the value of life insurance in a previous newsletter, and unfortunately, it’s one of those decisions that changes based on your circumstances. However, King says no matter what, “never reduce or cancel cover before having a thorough health check, as many clients regret losing their insurance”. King says calling your insurer and working out a package that suits you best moving forward is better than spontaneously deciding to commence or cancel cover. “Be aware that the cost of cover increases substantially in your 50s and beyond, which enhances the reasons to seek a review rather than cancel in haste,” he says.
- Think about your purpose: When you’re doing like Dolly and working 9-5, work can become one of your main “activities” and ways you spend your day. But once you retire, you no longer have something to consistently take up your time, a transition which can be difficult for many people. Bec Wilson, pre-retirement guru and regular Money writer, is a big advocate of taking the time to think about what’s next in your post-work life. “Contemplate where you’ll find purpose when you no longer work and start exploring pursuits, activities and projects you can get passionate about long before you retire,” she says. “[Also] recognise that your health is crucial to a good retirement and start doing things today that your 90-year-old self will thank you for later – cardiovascular and muscle mass exercise, and a good Mediterranean diet.”
- Don’t switch off: As your retirement years approach, the number of things you need to get on top of may seem immense, and it can be tempting to stick your head in the sand. However, this will just leave you in an even worse spot when push really comes to shove, so starting early to understand the way forward is essential. Some people opt to have a financial advisor explain things for them, which is a perfectly sound strategy, but whatever you do, make sure it’s something.
Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.