are you ready for retirement

the three big questions to ask yourself

For some of us, retiring is not an option yet, you thrive on the stress and the thrill of achievement. And that is fine. For most of us, the time comes sooner or later that we want to spend more time enjoying the life that we worked hard for to get.

How do you know you are ready to retire?

I retired at the age of 55 and am still enjoying every day of it. When I joined the resources industry, women retired at 55 and men at 60, and that has always resonated with me.

As we get older, we find a reset of our priorities. We experience loved ones pass away way too early, and find that good health may not always be a given. Stress is not good for the body, and you may find that you want to spend time “giving back” while you still can. Changing priorities as you get older is normal, have a look at my blog on priorities!

So when the opportunity arose to head into an early retirement from my career, I took it. I have enjoyed my job, but there are so many other things I still want to do and experience in life.

There are three big questions you need to ask yourself to see if you are ready for retirement:

1. Do I have enough money to retire?

Unless you are a monk living off alms, you will need some money. This could be from your working capital, and supplemented by a part-time or casual job.

There are some simple rules of thumb’s you can apply to see if you are financial ready. 

• Annual budget: To start you will need a very realistic view of your actual annual expenditure. Then consider how that expenditure changes if you retire, so you will have less specific work-related expenses, but probably with more travel and hobby related expenses. So be honest with yourself!
• Take any fixed pension payments you are going to receive and deduct these from that annual budget to work out how much money you will need to cover annually from your working capital.

• Working Capital: Working capital are your assets (savings, shares, any pensions as well as cash in the bank, but excluding property) minus any outstanding debts (credit card loans, mortgages, student debts etc). WC = assets – debts
  • The simplest rule of thumb is that you will need to have access to a working capital that is 25 x your annual expenditure.
  • Or the other way around, take your total working capital, 4% of that total amount should be your annual budget.  The assumption is that the capital growth outstrips inflation and you will actually keep a near constant ongoing balance.
  • You can include assets you can and will realistically monetise, like an investment property, to that working capital.
  • And it may sound logical, but pay off as many debts as you can, if possible all, before retiring. Sounds logical doesn’t it, any interest rate rises will be then beneficial!
  • Yes, you can make up a very detailed calculation and spent $1000’s on financial advisers, and indeed I have in the past. But what they come up with is pretty similar to what the rule of thumb provides!
• Have some spare cash for unexpected expenses.
  • Have one or two years worth of expenditure from your total working capital in a high interest savings account, like the ING Savings Maximiser. It is one of the highest interest savings accounts around in Australia that allows you to withdraw immediately if you do need the money (for emergencies, a replacement car, kids weddings, etc.).
• You may take on a part-time or casual job, or do some project work, but be realistic about how much you think you could earn. Do note that if you convert your super into a pension there are restrictions on where and how much you can work!

2. Where do I want to live?

You need to consider where you want to live now you are no longer required to commute to work, house the children and be within a specific school district. This is a very important part of the decision to retire, but one often overlooked.

A tree or sea change is much easier if you move away from your old commuting / work life and fully embrace a new lifestyle.

Consider that you may be able to release some of the money that you have in your house by downsizing and moving further away from the city centre or school district you wanted to be close to.

Where you live will also impact the annual budget you need, and how you are going to be able to fill your time.

Interestingly, we note that friends who stay in the same house when they retire do appear to spend more time travelling away from home than those who have moved house and embraced a new lifestyle. Just an observation…..

3. So, what am I going to do?

You will need to establish new routines, especially if one of you used to be more at home than the other. Retirement is for both of you, so re-establish roles and responsibilities around housework and ensure both of you get to enjoy this new stage in life. This will require communication and a decent amount of conflict resolution! 

To enjoy your retirement, you will need to stay fit and active. The ABC of Act, Belong, Commit is at the heart of it. Although you may want to have a couple of weeks of de-stressing and sleeping, it is important to build a new routine pretty early on. Otherwise you may find yourself hooked on checking the weather app like a friend of mine, driving his wife slowly mad!

• Volunteer:
  • Use your professional skills, consider joining the local village organisation, volunteer, get involved at the church, help out with reading at the local primary school.
  • Become a mentor or coach via one of those professional organisations you used to be a member of.
  • Now is the best time to give back while your skills and knowledge are still relevant!
  • We have considered travelling and teaching English as a Foreign Language. Although the Covid travel restrictions put a stop on that, it is an interesting way to travel and live in various countries, and not just for students!
• Stay active:
  • walk, yoga, gym, you now have the time to ensure you enter the next phase of life as fit and healthy as you can. 
  • I have a yoga app that I use to start each day with a 20-30 minutes session. I absolutely love starting the day with some nice stretches and poses; on the deck, overlooking the hills, paddocks and the lake.
  • We chose our home to be within walking distance of the nearest coffee shop. When walking to our morning coffee we have time to talk, and enjoy the views, combining mindfulness with connecting and exercise.
• Learn something new:
  • keep those brain cells busy, remember it really is “use it or lose it”!
  • Check out the University of the Third Age (U3A), meet others and learn something new.
  • Start writing that book you always wanted to.
  • Download the DuoLingo app and learn a new language.
  • It is not too late yet to start playing an instrument, or pick up on those piano lessons you had as a kid!