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How To Financially Prepare For Your Retirement

ASR Team

Self-directed investors have relied on Australian Stock Report for over 20 years to provide them with comments on the Australian stock market and useful insights. We provide Australian investors with market news and research to make decisions that would help manage their savings, build a sustainable income, and potentially achieve capital growth.


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With the national retirement age sitting at 67 and the average life expectancy being 83 for Australians, many retirees can enjoy their leisure time for around 20 years. Making sure your financial situation is stable and secure during that time is extremely important.

Preparing for your retirement can seem like a daunting process, especially when it comes to working out your financial situation and what kind of lifestyle you wish to have. This in-depth guide will take you through how to financially prepare for your retirement with the use of different retirement income streams and investment options.

How Much Do I Need To Retire? 

Determining how much money you will need to retire depends on the kind of lifestyle you have and the retirement goals you wish to reach. The average Australian should be saving around two-thirds of their current income each year to afford to retire comfortably.

For example, your numerical value in retirement savings should be a minimum of $500,000 to give you a comfortable lifestyle in your old age. Of course, this number will be different for every individual and couple, and will come down to several factors, including lifestyle choices, required costs such as medical costs and debts and the income options you choose to invest in.

Here is a step-by-step guide that takes you through the retirement planning process:

1. Develop Your Retirement Goals

Take a look at your retirement from a broad spectrum. Within this part of your life, what would you like to accomplish, and what do you hope has already been achieved?

There are certain goals, both general and financial, that you should discern before setting up your retirement. In terms of financial goals, you may want to achieve financial freedom or have a specific amount of money saved before retiring. Other finance goals could include:

      • Being debt free
      • Having a passive income
      • Having a certain amount of savings
      • Money that is set aside for travel
      • Money set aside for family or children’s inheritance
      • Having wealth preservation strategies in place

Consider Your lifestyle

When establishing any financial goals you wish to reach both before and during retirement, it is important to consider how your lifestyle and spending choices will affect any savings goals.

When preparing for retirement, you should project how much your working life income will be attributed toward savings and superannuation funds. If these goals are currently unclear, it may be wise to set up a budget that outlines what is spent and saved for the future. Other strategies could include seeking help from a financial adviser or investing in financial planning advice.

'Comfortable' vs 'Modest' Lifestyle

It is a good idea to consider what kind of retirement you wish to have, along with whether you've already reached financial freedom from debt and mortgage. When thinking about your future lifestyle, do you wish to have a 'comfortable' or 'modest' retirement?

A comfortable lifestyle could include extra spending money for travel, luxury items or even a higher-level care facility when required. A modest retirement refers to a retirement in which all of your basic needs and comforts are easily covered without any financial anxiety.

You should also think about whether you wish to move into an aged care facility or will need extra support for medical issues or problems that have arisen during your older age.

Duration Of Retirement

Another factor to acknowledge is how long your retirement will actually be. Considering this does no't have to be morbid, but instead a logical discussion. Think about the following questions:

      • Are you going to retire at the Age Pension age of 67, or do you have the capability to retire earlier?
      • Do you wish to continue full-time work or generate income after the age of 67?
      • What is the average life expectancy for someone of your age and gender?

Asking yourself (and your partner) these questions will allow you to structure your financial goals and retirement planning around a rough length of time. While not completely accurate, this duration should give you a good guess of how much money you'll need to retire.

2. Assess Your Retirement Income Streams

When looking into your retirement income, it is important that you know all of the income options available. After reaching the 'preservation age' between 55 and 60 years old, you are able to access your Superannuation funds. These funds, supplemented with other income such as the age pension and passive investments will make up your income in retirement.


After being eligible to access your superannuation balance, you can then explore these options for how you would like to receive it during your retirement:

      • an account-based pension
      • an annuity
      • a lump sum amount, or
      • a combination of these.

You could also consider a transition to retirement strategy. This means you can use some of, and keep contributing to, your super while continuing to work.

Government Age Pension 

The government age pension is an income support payment to help retired Australians aged 67 or older afford basic living expenses during retirement. You have to be eligible to receive these government benefits. This eligibility is based on your current working income and gained investments and assets. Additionally, your payment amount will reflect this income and investment accumulation. 

The income and assets test for government age pension looks into:


      • employment
      • pensions
      • annuities
      • investments
      • earnings outside Australia
      • salary packaging


      • investment properties
      • caravans, cars and boats
      • business assets

Depending on the amount of income and assets you have accumulated, your government age pension payments may be lower or higher than the maximum yearly amount or full age pension, which is around $25 000 for a single person and $38 000 for couples.

Savings, Assets & Investments 

The final income option that can be utilised in retirement is any savings, assets and investments you have built up throughout your working life. Of course, if you have a significant amount of these, you will most likely receive a lowered amount or no age pension.

However, having personal savings and assets can be extremely helpful in supplementing your income in retirement. The investment you could have accumulated includes:

      • cash savings
      • real estate and investment properties
      • stocks and shares
      • owned home or business
      • bonds or hedge funds
      • fixed deposits or annuities

If your pre-retirement income allows you to build up these different income streams, you could extensively supplement your retirement plan and a comfortable retirement lifestyle will be well within reach.

It can be tricky to navigate the different investment options and opportunities out there. Having the support of a financial adviser, like the Wealth Advisers at ASR, can be crucial to creating and keeping successful investments and assets.

The ASR Income Report can help you determine how your income can be better improved through financial planning and investment supplementation. On top of this, subscribing to the ASR Investing Report will give you complete access to the educational resources, current market news and share recommendations and advice that you can use for your retirement income plan.

3. Consider The Risks 

Whether you're in your 'preservation' age, are almost at retirement or looking way ahead into the future, it's important to consider the risks involved in retirement. No matter the income streams you choose or are eligible for, there are a few things that may jeopardise the future lifestyle you wish to uphold.

Duration Or Length Of Retirement 

Your duration or length of retirement can severely affect the savings, superannuation funds and investment income you input into your retirement. Estimating your retirement duration can be difficult to guess, with sudden illness, or emergency needing to be factored in. You may even have the need to retire prematurely for unforeseen personal circumstances.

With this in mind, it is integral to begin your financial planning early, and ensure your superannuation funds are set in place as soon as possible.


Inflation and the rising cost of living expenses may affect how you use your current income you earn. If less is being put into savings and investments, it may affect how much money you will have for your impending retirement.

While it should not be the cause of stress or anxiety about the future, it is important to factor in how the current financial market is behaving when setting financial or saving goals.

Market Volatility

If you have invested in shares, bonds or anything that can be affected by a financial market, it is always a good idea to factor in market volatility. Before investing, consider looking into low-risk, long-term investments rather than more volatile or risky choices to avoid investments that have constant fluctuation.

It is also important to consistently monitor your investments and keep up to date with current trends and market news that may affect your investing opportunities. With ASR's Investing Report service, you'll receive both daily and monthly updates on the current market, as well as recommendations from knowledgeable and reliable advisers on the best shares to invest in.

4. Create A Retirement Plan 

The final step to securing a solid retirement income is to create your retirement plan. Planning in advance is key to building a successful plan and retirement income that can be used in the future. When creating this plan, you must consider all the risks, goals and opportunities mentioned previously, as well as constructing a strategy for reaching your overall financial goals.

Develop Your Safety Net 

Your safety net or nest egg is a safe amount of money that will cater toward your chosen retirement lifestyle while also being able to pay for any emergency or unforeseen circumstances. This safety net can be made of several financial streams, including your superannuation funds, savings, investments and once retired, the age pension.

Consider A Passive Income Stream

The investments that you built and monitored during your working life can still be used to earn money during retirement. This will give you a passive retirement income that requires little work, and will keep the mind sharp as well!

Whether you have invested in stocks and shares or real estate, keeping these assets will give you passive income that will further supplement the nest egg that you have worked for during your lifetime.

Wealth Preservation

Finally, it is always a good idea to plan for your future generations and uphold your legacy. Wealth preservation includes not only inheritance for your next-of-kin, but setting up your will and estate, and considering how you can preserve your accumulated wealth.

No matter your current working income, Australian retirement means you will be supported to live a comfortable lifestyle for your remaining years of leisure. Whether you have the full age pension, a huge safety net or are living off additional income you've built over your lifetime, retirement will hopefully be a relaxing and financially freeing point in your life. 


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All information in this article is of general nature only; it is not intended or to be construed as an offer, solicitation or recommendation for any financial product and does not take into account your financial situation, objectives or needs. Before acting on the information herein you should consider whether it is appropriate for you in light of your personal circumstances. Where applicable, you should obtain and consider a Product Disclosure Statement, Prospectus or other relevant disclosure material and seek professional investment advice prior to making any decision to acquire or dispose of a financial product.  Investing in financial markets and instruments involves risks, including loss of some or all capital. The payment of income and the return of capital are not guaranteed. Past performance is not an indicator of future performance. Whilst the information presented herein is believed to be reliable and obtained from trusted sources, ASR does not make any representations as to its accuracy or completeness.

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