The record numbers of Australians moving into retirement are doing so in a world that is becoming increasingly uncertain at a time when work-life values are changing.

So that means retirement needs increased planning with options for financial security requiring early consideration.

“You should try to develop a retirement roadmap at least 10 years before retirement,” says Michael Abrahamsson, director with Flinders Wealth.

That involves looking at your financial and lifestyle situation now and where you would like to move to as you retire.

Savings target

Firstly, think of a savings target for your super.

The Association of Superannuation Funds of Australia says a comfortable retirement today will demand a (home-owning) couple have $690,000 in super or a single $595,000.

For a modest retirement relying heavily on the age pension it’s more like $100,000 for both couples and singles.

OK, so that can give you a target to aim for. If you are in a position to have more than that, then great, you can build up a better retirement.

Compound interest

But as Abrahamsson says, the earlier you start the better the retirement outcome.

“Making extra contributions earlier gives you the benefit of compounding, especially with superannuation because of the concessional tax treatment it enjoys,” Abrahamsson said.

But we all have conflicting financial commitments and needs, so look at the big picture for a moment. There was a time when interest rates were so low and super growing so fast that super balances could outgrow mortgage commitments.

But things have changed.

Reduce mortgage debt

“Mortgage rates were 2 per cent and how they are 6.5 per cent so there is a strong focus on the need to retire mortgage debt,” Abrahamsson said.

So making a concerted effort to reduce your mortgage before retirement will pay dividends later.

The Melbourne Institute Roy Morgan Pulse of the Nation survey recently reported that those without cost-of-living worries are actually saving.

“Nearly 90 per cent indicate they could draw on savings or assets to cover an emergency expense,” the report said.

However of those feeling cost pressures “only 35 to 40 per cent … indicated they would draw on savings or assets”.

Downsizing for a super boost

If you own an empty nester family home you have a great chance to boost super and reduce any mortgage you may have.

That is taking advantage of what is known as a downsizer contribution to super.

It works like this. If you sell a larger family home and move into a smaller property you can make a super contribution of up to $600,000 per couple.

Details are below but a distinct advantage is that does not add to your non-concessional super contribution cap over three years which will be $360,000 from July.

So that could help you get to the sort of super balance you require without affecting your lifestyle while you save.

Plan for life

Retirement is not all about money and there has been a marked shift in peoples’ attitudes to work and life in recent years.

“People aren’t wanting to work in their job from age 40 to 67 any more,” Abrahamsson said.

As they move towards retirement “it might be consulting or working on contract part-time to add meaning by contributing around young people and being engaged in the community,” Abrahamsson said.

People also want the flexibility to travel, perform grandparent duties and volunteer. So check in with how you want to spend your life as you age and build that around your financial situation.

Remember there are flexible tax arrangements that make it attractive to work a little after formal retirement.

Helping the kids

The baby boomer generation has been fortunate to be able to buy property when it was relatively cheap, but their children have not been so lucky.

But because they often have property and super they can be in a position to help out the next generation.

Think about when and how you go about this.

Once you retire or put your super into pension mode you can take out lump sums to help dependents. But remember to factor in your own needs.

If you plan to retire on a part pension then any gift you make above $10,000 in one year or $30,000 over five years will be considered part of your asset base for five years.

That means it could reduce your pension entitlements but leave you without the benefit of using it yourself.

So if you plan to go down that path, timing is important.

“If you give at age 60 then it’s not caught in the gifting provisions when you draw the pension from 67,” Abrahamsson said.

You may also want to wait a bit in retirement before making a substantial gift from your super or other assets.

“The first five years of retirement tend to be the most expensive as people do the things that have been delayed during their working lives,” Abrahamsson said.

So you could consider giving yourself the experiences you want before helping out family so you don’t feel deprived.

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