The Financial Planning Association of Australia The Financial Planning Association of Australia

The step by step guide, to achieving a comfortable retirement


| by James McFall, CFP®

1. QUANTIFY WHAT YOU VALUE MOST IN LIFE

What you value most in life is a representation of who you are as a person. There is no right or wrong answer, it is an entirely personal blue print of what makes you who you are and in order to plan effectively for your retirement, you should always start by detailing your values.

2. PRIORITISE WHAT IS IMPORTANT TO YOU

It is proven that there is a high correlation between people who achieve their goals and those who have committed them to paper.

A financial plan is about prioritising and charting your key goals and objectives on a timeline, then documenting how they will realistically be achieved. This process is one of the most important things you can do, to achieve a comfortable retirement and meet your other financial priorities along the way.

3. NURTURE YOUR SUPERANNUATION

In all likelihood, superannuation will be your biggest retirement asset. To explain it simply, superannuation is a ‘tax structure’ which has highly favourable tax rates designed to encourage us to save for our retirement. The tax treatment is so good in fact, that by 60 years of age all investment earnings and withdrawals may be tax free (depending on your circumstances). This is essentially no different to investing in a tax haven, but it is legal!

4. HAVE A PLAN FOR HOW YOU USE YOUR FREE CASH FLOW

What you can afford to save, is the amount of money you have to play with to meet your short, medium and long term goals.

The first important step is quantifying what you have and this can be done in a range of ways, including budgeting, committing to a savings target or looking at how much you are paying off your home loan.

5. CONSIDER INVESTING SAVINGS OR ACCUMULATED CAPITAL

Most of us have accrued capital that is either locked away in bank accounts or home equity. Quantifying how much you have and what you are prepared to invest for the future, is the next most important step in securing your retirement.

6. LEGALLY MINIMISE YOUR TAX LIABILITY

Tax is the biggest expense most of us will have in our life, yet few of us understand how to structure our finances to achieve a lower tax bill.

7. STRUCTURE YOUR DEBT PROPERLY

Typically the second biggest expense after tax that most Australians have to pay in their life is the interest they pay to the bank. Ensuring your debt is structured properly throughout your working life, can save $100’s of thousands of dollars over the journey and like tax, it can offer a guaranteed rate of return, by virtue of paying less interest.

8. PROTECT YOUR DOWNSIDE

Risk mitigation is equally important to growing wealth. In fact, without effective risk strategies you will almost certainly underperform your potential.

9. WHEN YOU RETIRE, MANAGE YOUR ASSET DRAW DOWN

One of the most important things that you can do, when you reach full retirement and begin drawing down on your asset base to fund your income needs, is manage your asset draw down. Managing your asset allocation effectively throughout retirement is the key to maximising your retirement savings.

10. SEEK ADVICE

The value of advice can be broken down into four fundamental categories. How you prioritise what is most important will differ from the next person probably, however understanding what you value in advice most will help you be clearer on what you are looking for from an adviser.

  1. Financial
  2. Emotional
  3. Practical
  4. Expertise

For an in-depth version of this article, please click here.

James McFall CFP®
Yield Financial Planning

James-Photo-2-300x300

James McFall, CFP®

Yield Financial Planning
The Advice Exchange
http://www.yieldfinancialplanning.com.au/

James is the founding director of Yield Financial Planning and has over 15 years experience. A CERTIFIED FINANCIAL PLANNER® professional, he also holds a Master of Commerce (Financial Planning), and a diploma of Financial Planning.

Whether you are a professional or business owner, retired or contemplating retirement, James and the team at Yield are committed to helping you grow your wealth sustainably, protect your downside and retire with confidence and peace of mind.

FPA Disclaimer:
Information provided is in accordance with our disclaimer – users should ensure they read this disclaimer before continuing to use this site.