5 Steps to Retirement

Step 1 – Understand what retirement means for you

A dream retirement is very different from person to person, some of our clients draw a minimal level of income as they have everything they need, they spend time in their garden, with their friends and their loved ones (including the furry kind!). Others prefer a more luxurious retirement with multiple holidays per year. The key is working out what is important to you for your retirement.

For example, we commonly see that clients want $60,000 per annum in retirement (equivalent to around an $80,000 wage when working), this covers their base level lifestyle expenses. On top of this we also ensure that we plan out for other larger expenses such as holidays and car replacements.

This step is one of the most crucial as the amount you spend can determine not only when you can retire, but how long your money will last.

If you aren’t sure how much you are currently spending, you can download our free budget template here.


Step 2 – Assess how you will fund your retirement

There are many ways to fund a retirement from utilising your superannuation which you have built up over your working career to getting some age pension entitlements. Firstly, assess all of your current assets, these may include:

  • Cash
  • Personal Shares & Investments
  • Investment Properties
  • Your home (if you are wanting to downsize)
  • Superannuation
  • Annual Leave and Long Service Leave


If you are wanting to utilise the age pension to fund part of your retirement you can visit Services Australia’s website for more information. With this you should review what age you can claim the age pension (Generally 67), how many assets you can have under the assets test and how much income you can earn under the income tests.

You might ask, when is retirement age? The actual answer is that there is none. There are key dates which some people use but if you have the means to retire then it can be at any age.

The two key dates are preservative age at age 60 which is when you can access your accumulated superannuation benefits. The second being the age pension age which the eligibility age has increased to  67.

You can use the 4% rule as a very rough guide to how much you can currently fund, this is simply using your current financial assets as outlined in step two (not including your home) and multiplying it by 4%. This will give you a safe rate of return which you can draw throughout your retirement – remember that retirement may not be short, if you retire at 60 or 65 you may still need to fund 30 years of expenses.

If you are eligible to receive a part or full age pension, then you won’t need to fund as much from your assets in retirement.


Step 3 – Assess your risk appetite

When planning on accessing your investments you will need to ensure you find the right balance of exposure to the share market. On one side you want to be invested in the share market in Growth Assets to have a higher potential rate of return, on the other, you want to have Defensive assets such as Cash and Fixed Income to have access to liquid assets and to reduce risk for the capital you need access to in the shorter to medium term.

You want to strike the right balance which you will be comfortable with and won’t keep you up at night, but also to provide you with a sufficient rate of return over the long-term to continue to fund your retirement.

It is critical to ensure your portfolio is protected against some level of volatility within retirement. Investment volatility is the fluctuations in the share market, these large fluctuations are protected against by utilising defensive assets such as cash, bonds and credit.


Step 4 – Reviewing your existing structures and investments

We find a lot of new clients coming onboard haven’t had their investment or super platforms reviewed for a long time (and some have never looked at them!). Ensuring you are invested in the right platform and/or entity will help to not only protect your retirement but will provide access to a better range of investments, tax efficiencies and functionality to assist with your retirement.

There are three major components when reviewing your platform and investments:

  1. Diversification – This is having a spread of your investments over multiple areas – essentially not having all of your eggs in one basket. Your investment basket may contain things like Cash, Australian & International Fixed Income, Australian & International Equities, Property and Infrastructure – note that there are also many subsectors to these although if you are going it on your own passive funds can often add exposure to many companies without too much oversight required.
  2. Fees – Both your platform (investment and super accounts) and underlying fund managers charge fees. Comparing your fees to another fund is one component to ensuring you are getting bang for buck. Although it is worth noting that platforms which are very cheap often have limited functionality and investment availability.
  3. Investing for the long term – as you are funding potentially 20, 30 or 40 years + in retirement it is good to remember that you are investing for the long term. On an emotional level you may feel that you should reactively buy or sell investments but often this will lead to worse returns than just leaving the investments alone. Our preference is to bucket assets which means during a market crash our clients don’t have to decide which assets to sell and instead can continue to have a stress-free retirement.


Step 5 – Ensuring you are ready

Wanting to retire is one thing, we often forget that going to work provides people with a bit of purpose or connection to their friends. When looking to retire you should have a think about what you would like to do, whether it’s taking up a new hobby, volunteering or spending more time with the family. At the end of the day, you need to have something to do on a day-to-day basis to ensure that you enjoy your retirement.


Next Steps

If you are planning for your retirement and are looking for some help to make it happen, you can book in a complimentary 30 minute consultation with us to see where we can help.