How ready are you to retire?
The prospect of retirement is a scary thing, not only the aspect of keeping busy and maintaining an interactive social life, but one of the main concerns nowadays is as the population grows older the prospect of living longer is a reality. The primary concern of course is as to how long your money will last. As the official retirement age in most countries is increasing many people are having to make other provisions for their retirement and not be solely dependent on the government benefits and pension schemes.
Planning for retirement is a complex web of things to consider and that is why it is so important to plan for your retirement and seek independent financial advice. The financial aspect is critical in preparing for your future retirement, health and wellbeing.
Below is a checklist of some of the considerations you should be looking at in order to be well prepared for your retirement
1. Take stock
The most important thing to do is take stock on where you are at now. To get a good picture of where you are at; it’s best to make up a spreadsheet of your assets, debts, liabilities, savings, insurance policies and income streams. Don’t forget also your valuable assets such as properties, vehicles and other valuable possessions.
2. Build a contingency fund
We all know the best of plans don’t always work out and we have to be sure that we have planned in the event that the unexpected happens. Making sure you have not thrown everything into your retirement living and ensuring you have enough funds to handle a personal crisis is critically important. It is always better to keep this “contingency” in a separate account so as you are not tempted to spend it on that “cruise”!
3. Eliminate all debts
It is important to eliminate your liabilities and debts and therefore make a plan to pay off any outstanding car loans, mortgages or credit card debts. You certainly don’t want to be burdened with debts as you move into your retirement.
4. Lifestyle Budget
You need to prepare a budget for your retirement lifestyle. If you are moving overseas or to another area then you also have to consider the moving expenses or the cost of furnishing your new home. You’ve probably worked hard all your life and you need to ensure that you can enjoy your retirement without having to be too frugal. Retirement is a time to do those things that either you never had time for, or have always wanted to do so you need to budget for those little luxuries like travel, taking up a new hobby or learning new skills. You also need to consider when your income streams will start coming in and how you will receive them as well as any tax implications on that income. That’s why it’s important to seek the advice of an independent financial advisor.
Make sure you understand your government pension or private pension entitlements. At what age you are allowed to start receiving your pension and how often and where it is paid. Are there any tax implications involved and are there any penalties if you choose to retire overseas
6. Health Insurance
Health Insurance is a major consideration as you age since this can be one of the most costly expenses you will incur. It is estimated that Health cover can be as much as 15% of your annual expenses during retirement and this increase the older you get. If you are considering moving overseas then your “government” health insurance will more than likely not cover you therefore you will have to consider a private insurance plan. You also need to consider as to where you will retire to and the level of healthcare that is available. Dependent on the quality of healthcare you might need to include “medical evacuation” which will ensure that you are repatriated or sent to the nearest high quality healthcare centre should an emergency arise.
7. Plan your estate
It might seem morbid or a bit too early to be planning in the event that something happens to you. It is important to have a proper “will” in place to ensure that your family is not plagued with any financial burden and to ensure that your assets are dispersed according to your wishes. You also want to consider tax planning here and that you minimise the tax liability from your estate. Ensure you keep personal documentation and a list of your assets and investments in a safe place and ensure they are updated regularly in the event of life changes.
8. Look into Retirement Investments
It is best to start looking into a retirement investment well before retirement and not as and when you retire! There are a complex range of investment options available however since this money is for your retirement, you want to be sure to enter into low risk investments which invariably give a lower return and not be tempted by “high return” investments which come with a “higher risk”. If you have some capital from downsizing or from your savings it is important that you make that money work for you during your retirement since this can give you a steady income stream to support your retirement lifestyle. It’s important that you consult with a financial advisor as to the best way to invest to suit your individual circumstances.
9. Withdrawing funds
Make sure you are clear as to how and when you are able to withdraw your retirement income stream. If you are moving abroad be sure to ensure that you find the most cost effective way of transferring money and minimising excessive bank charges.
As you can see, planning your finances for your retirement is a complex process. Laws and regulations with regards to tax and your liabilities change all the time and therefore it is recommended that you seek independent advice in order to develop the best individualised plan for your needs.
Bali Insight Living assists clients wanting to trial the Bali Lifestyle with a view to retiring in the long term. Bali Insight Living shares information with their clients to enable them to make an informed decision both before and after the move and Bali Insight Living is on hand once the client has moved to Bali to assist them settle in and introduce them to the expat network to enable them to build their social circle.
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