What type of retirement will work best for you?

If you’re currently aged 50-60, you’re probably still working hard, paying off a mortgage and maybe parenting feisty teenagers. Or you could be renting and trying hard to meet the twin challenges of cost of living increases and rising rents due to a shortage of housing.

Whatever your situation, retirement may be the last thing on your mind. But the years have a habit of slipping away quickly and all too soon retirement decision making time arrives. Which begs the question, what type of retirement will you have? The good news is that the earlier you explore this question the better your later years are likely to be.

Retirement has undergone radical change since your parents’ generation. It’s now a much more fluid, transitional phase than the previous ‘full stop’ that saw people farewelled from the workplace one day and home 24/7 the next.

The workplace is no longer one place, but many diverse locations. The Covid epidemic forced further change with the ability to work from home now available to many workers. And the ‘gig economy’ means many jobs are now just short projects.

The earlier you explore your retirement plans the better your later years are likely to be. Photo: Getty

This means that most people no longer ‘retire’. Instead, health permitting, they step back or transition to retirement through reduced hours or responsibility, whilst maintaining a role with their current employer.

Or they may take a sabbatical – gap years are increasingly popular – and then re-enter the workforce, refreshed and ready to go (you can calculate the effect of your own potential time out here). Still others will choose to pick up small work projects along the way.

What you need to know to design your own best retirement

Planning a retirement when the workforce is now so dynamic may seem even more challenging. Yes, there are more moving parts, but these challenges also present opportunities to explore a life designed to suit your own interests, passions, skills, needs and dreams.

In effect, retirement is now a DIY exercise. Here are five major considerations to help you design your future life.

Wellbeing

This includes your physical and mental health as well as the state of your relationships. Would you currently describe yourself as being at peak health? Or do you have some limiting medical conditions or niggling concerns?

How you manage your health now is an investment in your 70- year-old self. Delaying optimal health management is not a solution. Start with a visit to your GP for a full medical check-up and a 12-month health plan.

Purpose and Contribution

What makes you get up in the morning right now? Is it the need to work, parenting duties, or a creative project? The answer is probably obvious.

But what might make you get up in 20 years’ time? Is this less easy to answer?

That’s because work can occupy a huge part of our lives, with the need to work dominating most other aspects. But remove work, and will your sense of self simply collapse? Many pre-retirees look forward to the day they can enjoy the satisfaction of volunteering. But unpaid work is, somewhat ironically, a luxury for those with secure incomes.

There are many different forms of purpose – the intergenerativity of caring for grandchildren, the stimulation of lifelong learning, the privilege of mentoring.

If choosing your own future purpose proves difficult, one strategy is to try to observe people you admire for their productive later lives. What do they do that’s worth emulating?

Your home

Where do you plan to live post-work? You may dream of a sea-change or a tree-change (and many Australians have done exactly this), but the majority choose to stay put in their current neighbourhood, valuing the connections built over time within their community.

Whatever your plans, it’s important to have an idea of where you would like to live and what this is likely to cost. If there is a move involved, what effect will this have on your retirement income? Planning for secure accommodation in your later years is one of the greatest favours you can do yourself.

Timing

Not everyone has the luxury of choosing when they will leave full time work. According to the most recent statistics from the ABS more than 20% of Australians retire because of redundancy, poor health or caring duties.

For those who do get to choose, knowing trigger dates such as Preservation Age (when you can gain access to your super), Age Pension age and other ages when super laws change is important. Knowing these basics can save money and minimise financial stress.

Funding

Funding comes last in this list as, until you have a clear idea of the other four considerations, your funding needs will vary. Our next article in the Road to Retirement series will explore the five levers at your control to create a secure retirement income stream. The first step is to create a household budget that is both realistic and affordable.

In summary

There’s no need to make this hard work. Planning the rest of your life should be fun. Here’s how to get started.

• Set aside a couple of hours (and invite significant others to join you)
• Assemble your current financial statements plus a blank sheet of paper or spreadsheet,
• Put on some music,
• Pour a cheeky wine or make a coffee,
• dream big, plan hard, then
• Record your plan for future reference – and to be shared with a financial planner if need be.

Reframing retirement is part one of the 8-part Road to Retirement series. Next time we will talk about how to ensure that your money lasts as long as you do!

Stick with your Industry SuperFund in retirement and your money could go further. Visit compareyourretirement.com today.

This content is produced by The New Daily in partnership with Industry Super Australia.

 This information provided in this article is of a general nature only and does not constitute financial or other advice. It is important to consider personal objectives, financial situations or particular needs when making financial decisions.