How to Ease Into Retirement

Hi Folks,

I debated whether to post this article in this blog or in my other blog, Retirement on a Budget, but as it’s such an insightful little article I just might publish it in both.

Woody

Easing Into Retirement

By Liz Koh

Retirement is something to look forward but ensuring that the experience lives up to your expectations requires some forward planning.

It is common for people close to retirement to wonder if they can afford to retire or whether they are doomed to carry on in at least a part time capacity until their late sixties. Whether you can afford to retire will depend on two things – how much you need to live on and how much wealth you have accumulated. As a rule of thumb, for every $5000 of income you need over and above your pension and assuming a return of 4% after tax and inflation, you will need to have $125,000 invested. If you decide to use up your savings over your lifetime as well as the income from your savings, you will need roughly half as much, say $63,000 invested for each additional $5,000 of income you need. To make an easy transition into retirement, try and live on your planned retirement income for the last one or two years of your working life, and save the difference between that amount and what you earn. For example, if you have saved enough to produce an additional income of $10,000, then try and live on around $31,000 before you retire (you might want to add to this figure any work related expenses such as transport costs).

On your retirement, have a general tidy up of your affairs. Make sure your wills are up to date, take care of any other estate planning issues, and consider granting enduring powers of attorney to a relative or friend, so that they can sort out your affairs if you become mentally incapacitated. Your solicitor or trustee company will be able to assist with these matters. Once you’ve sorted out the paperwork and your budget, you’ll be free to enjoy the retirement you’ve been anticipating.