Has lockdown got you thinking about your long-term goals? Is retiring one of them?
It’s never too early to start planning for retirement. If you don’t have a retirement plan, now is the time to take action. No matter what your financial state is today, there is still room to supercharge your savings and enjoy the retirement you want.
We’ve put together this 10-year countdown towards retirement, and what you should do each year. Although we start our countdown at 10 years, these practical steps can be taken at any time.
10 years until retirement
Step one is often the most challenging one. If you haven’t already done so, it’s time to find out your retirement number and how you are tracking to achieve that goal.
Read this analysis by the Westpac Massey University Fin-Ed Centre to find out how much money you might need if you are retiring in New Zealand. To work out your retirement budget, you’ll need to work out:
- What kind of lifestyle you want and can realistically achieve: are you aiming for a “no-frills” retirement where just your basic needs are covered or are you dreaming of extended overseas travel?
- How much money you expect to have available by the time you retire: take into account NZ Super, your KiwiSaver investment, other investments, and any other savings
You might also take some time to think about your Will. Does it need to be updated? It’s easy to put off updating your Will, but it’s probably just as easy to update it. Tick this off your list. Remember that you are doing this for your loved ones, to protect them at a difficult time.
8 years until retirement
Did you know that over-65s in New Zealand owe an average of $232,000? Paying down your mortgage before you retire is a must if you want to enjoy a comfortable lifestyle.
If you have personal loans or credit card debt, address these asap. You can potentially put that debt towards your mortgage or re-finance to another credit card with 0% interest. If there’s one thing you should prioritise, it should be getting rid of your ‘dumb’ debt.
6 years until retirement
Review your KiwiSaver investment. Make sure you are in the right type of fund for your life stage. At this point, if you are in an aggressive fund you might consider shifting to a more conservative one. Talk to a Financial Adviser before making any decisions.
You can also take these last few years to make an extra income and boost your savings further: take in a boarder, subdivide your home, sell your home to family while retaining the right to live in it.
4 years to go until retirement
Before this year is over, you should revisit all the numbers on your retirement plan. Make sure you are still comfortable with how you’re tracking against your goals.
Another thing you will need to consider is where do you want to live. Do you want to live at home forever or move to a retirement community? Do you want to be close to family? While you don’t have to make these choices now, it is useful to think about them, and perhaps, research locations.
The final 2 years before retirement
65 doesn’t need to be your retirement age. There's increasing evidence that the payoff of working past age 65 may go beyond having an income and delay using your savings. Some studies have linked working past retirement with better health and longevity.
Now that you’re closer to retiring it’s time to ask yourself: should I keep working? You can decide to continue working part-time or maybe look at consulting. You might want to keep going. If you have a good retirement plan, the choice is yours.
1 year until retirement
When you are this close, you will be feeling excited about the next chapter of your life. Re-visit your retirement numbers and make sure there no surprises.
If you decide to stop working set a retirement date and share it with your loved ones. Put it in your calendar and start making short-term plans on how you’d like to spend the first few months in retirement. And remember to celebrate!
Now that you have retired, don’t fall into the trap of cashing up all your investments. Your retirement could be 20 or 30 years long and the money you’ve accumulated needs to continue working hard for you. Keep re-visiting your plan on an annual basis. Make any adjustments to your spending each year, reflect on what’s going on in your life and the environment around you to make the most of your hard-earned money.