What’s your plan for retirement?

This week is Financial Planning Week! If you have any burning questions about your finances, head to the Ask an FPA Expert forum and ask a qualified expert for free.

Your 50s to 60s can be one of the saddest times in your lives, when your last child moves out of home. Their car leaves the driveway, a big smile on their face, a quick wave goodbye and then they’re off on their next life adventure. As you wipe the tears from your eyes, a strange sensation comes over you. Your body relaxes, a smile sweeps across your face, your mind is clear and you realise that you finally have your independence back. Oh, what a feeling!

This is the perfect time to reassess your goals and start planning for your retirement. The thought of retirement can be daunting and many feel overwhelmed and unprepared. The inevitable questions surround your mind; where do I start? What do I need to do? How much money do I need in retirement? Will it last?

Retirement planning can be confusing, that is why you should have a financial planner. A financial planner will help you understand your goals and then develop strategies that will give you peace of mind, knowing that you are on the right track to financial independence in retirement.

How can you start your retirement planning journey?

To help you start your retirement planning journey, you first need to know how much money you require for retirement.

Here are some quick tips on how to calculate this amount:

1. Calculate how much income you need in today’s dollars. I recommend that you download the ASFA Retirement Standard Budget as a guide to calculate your income requirement.
2. The next step is working out when you want to retire and how many years you have to retirement.
3. Identify the type of investment risk you are comfortable with now, and also into retirement. Choosing a return on investment involves a trade-off between expected returns and the level of risk that you are willing to take. A financial planner can help you choose a suitable risk profile that is tailored to your individual needs. This is a critical element that can change the retirement amount considerably, so you need to make sure this is right for you.
4. Finally, consider what capital you want left when you pass away. It may be the SKI principal of spending your kid’s inheritance or alternatively providing generational wealth to your children. Or it may be somewhere in between.

After you have considered these steps, I recommend you see an experienced, qualified financial planner that can help you through the retirement planning journey.

Not sure where to look for a financial planner? All members of the Financial Planning Association (FPA) are bound by strict education and ethical standards. The FPA Find a planner directory will help you locate an expert near you.

Remember the sooner you start planning the more likely you’ll be able to achieve financial independence and peace of mind. Take action before it’s too late.

Contribution by James Wortley CFP®, Principal Financial Adviser at Enlightened Financial Solutions.