FAQ's
- Should you retire at the same time?
This can be a tricky question because you have to look not only at your current financial situation to assess if you are ready and can afford to retire together, but also decide whether you are mentally prepared for retirement. This involves considerations such as your age, your health and your feelings about transitioning from the work place.
Although retiring together can sound like a great plan, you also need to make sure that your money will last through retirement. It is best to sit down with a professional financial planner who can evaluate your savings and run different scenarios for you where the two of you retire together - and some in which you retire at different stages.
- Will you stay in the same home?Downsizing in retirement can have advantages from an affordability and mobility perspective, along with reducing your home maintenance requirements. If you are trying to decide if downsizing is the right choice for you, make sure you consider your new home location and its proximity to friends and family. Also factor in all costs of a house move – including professional fees, sales costs and the cost of a removals company - and the size of property that you require after retirement.
- How will you manage your finances?
When you retire, you move from savings mode to spending what you have accumulated over the years. That’s why it is so key to know exactly how much you are going to spend each month after you retire. A detailed budget will also help to lessen the stress about money in your golden years.
This can be done by simply totalling your fixed expenses (from bank statements) and looking for all recurring monthly, quarterly, or annual payments. The next step is to get a total for your essential spending. This includes food, clothing, housing, utilities, transportation, and health care.
The next step is to review your non-essential spend (things you receive a monthly bill for such as TV subscriptions, gym and mobile phone plans). Now that you've gathered all your expected costs, calculate how much is fixed and how much is flexible. As a general rule of thumb, you should find ways to lower your fixed expenses so you can have more flexible funds available to spend during your retirement. Once retired, you should try to keep at least one to two years' living expenses in an accessible account.
Please see our budget planner template.
- Should you revise your investment portfolio?
Taking care of your investment portfolio means taking care of both of you during retirement. The primary purpose of your investment portfolio during retirement is to protect your principal, so it is smart to reduce investment risk. That does not mean that you have to do it all at once. Because your retirement can last several decades, it’s important to consider some exposure to stocks to help combat against inflation.
For example, your asset allocation split before retirement may have been 60% in stocks, 35% in fixed income and 5% in cash. In early retirement, you may want to move to 40/50/10. As you reach late retirement, you may want to move to 20/50/30. There is no one size fits all approach to revising your portfolio during retirement, but how you invest should take into consideration your risk appetite and your financial priorities during retirement.
Talk to one of our Wealth Managers today about your financial plans.
