Prepare your finances for the future with our pre-retirement checklist!
Thinking about retirement is exciting, but it’s also a big decision that involves careful financial planning. Before you make the leap, it’s important to ensure that your financial situation is in good shape, so you can truly enjoy your post-work life. Here are five essential money tasks to check off your list before you retire.
1. Understand Your Superannuation Balance
Your superannuation will likely be your primary source of income in retirement, so it’s crucial to understand how much you have and how long it will last. This involves checking your balance regularly and reviewing your investment options to ensure they align with your retirement timeline. Most people underestimate how long they’ll be retired, so make sure your super is set to last for 20 to 30 years or more. You can also consider whether it’s worth contributing extra to boost your balance before you stop working.
2. Review Your Debt
Carrying debt into retirement can cause unnecessary stress, particularly if you no longer have a steady income. Take a close look at your debt, including mortgages, credit cards, and personal loans. Your goal should be to pay off as much as possible before retiring. Consider strategies such as consolidating debt or increasing your repayments while you’re still working. If you’re unsure about the best approach, it may be worth seeking financial advice.
3. Plan Your Income Streams
While superannuation is important, it may not be your only source of income in retirement. Take stock of any other investments, such as rental properties, shares, or dividends. Understanding your income streams will help you create a clearer picture of what your retirement finances will look like. Having multiple sources of income can provide more security and flexibility, but you need to ensure they’re structured tax-effectively.
4. Consider Healthcare and Insurance Costs
As we get older, healthcare becomes a bigger priority, and medical costs can quickly add up. Make sure you have appropriate health insurance in place and understand what it covers in retirement. You may also need to consider other forms of insurance, such as life insurance or total and permanent disability cover, and whether they’re still necessary. It’s wise to budget for unexpected health expenses, including any long-term care you might need later in life.
5. Set Up an Emergency Fund
Even in retirement, unexpected expenses will arise. Whether it’s a car repair, home maintenance, or health costs not covered by insurance, having an emergency fund will give you peace of mind. Financial experts typically recommend having six to 12 months’ worth of living expenses set aside in a savings account that’s easily accessible. This ensures you won’t need to dip into your retirement savings or take on debt to cover life’s surprises.
When purchasing your first home, it is also important to think about how you can improve my credit score with our simple guide. And learn if you should get insurance through your superannuation fund here.
