How to prepare for unexpected early retirement
Retirement is a significant life event that many of us look forward to with great anticipation. It's a time to relax, enjoy the fruits of your labour, and spend time with family and friends. However, unexpected early retirement can throw a spanner in your retirement plans and leave you feeling unprepared. Whether you're forced into early retirement due to a layoff, illness, or other unforeseen circumstances, it's important to prepare for the unexpected so you can still enjoy a comfortable retirement. Here are some tips to help you get started:
Assess your current financial situation
The first step in preparing for unexpected early retirement is to assess your current financial situation. If you had to retire today, how's your superannuation balance look? Knowing how much money you could have available if you stopped working unexpectedly is a good first step in your planning.
When reviewing your finances, consider your assets, debts and income sources, such as government assistance. For example:
- your superannuation
- any savings you have
- any debts you may have, such as a credit card or home loan
- income from personal investments such as shares or property
- your eligibility for the Government Age Pension.
Review your living expenses
Once you understand your assets and income sources, calculating your living expenses is a good idea. This helps you estimate how much you'll need to spend each year in retirement. Retirement expenses include rent, bills, food and entertainment, holidays, insurance, home or car repairs, and health expenses.
Knowing how much super is enough to last you in retirement or if your savings give you the lifestyle you want can be challenging. Use the Vision Super Retirement Income calculator or MoneySmart (a Federal Government website by the Australian Securities and Investments Commission) to see how much income you could have in retirement. You can also see how adding extra money to your super could increase your balance over time.
Explore how to turn your super into a regular income
If an early retirement comes unexpectedly and you've reached preservation age, you have a few options. These include taking your super as a lump sum or moving it to a specially designed retirement account, such as an account-based pension. With an account-based pension, you can:
- receive regular income payments from your super - similar to receiving a salary or pay from your employer;
- access extra money from your super whenever and for whatever you need; and
- keep your balance invested where it has more time to grow.
Get professional financial advice
Retiring earlier than planned means relying on your super for longer. This may seem daunting, but speaking to a financial adviser can help you understand and feel more confident in your finances. The earlier you start planning, the more control you will have.
In conclusion, unexpected early retirement can be stressful and challenging, but with careful planning and preparation, you can still enjoy a comfortable retirement.
This information is general advice which does not take into account your personal financial objectives, situation or needs. Before making a decision about Vision Super, you should think about your financial requirements and consider the relevant Product Disclosure Statement and Target Market Determination issued by Vision Super Pty Ltd ABN 50 082 924 561 AFSL 225054.