Planning for retirement is not so difficult, it just needs prioritizing in our competing financial obligations.  However, too many plans are based on assumptions that are questionable.  We see quite a number of plans put together by 'financial planners', but too many of these are either selling products or merely state what the legislation requires them to say.

Here are a few points to consider:

Retirement is not One Phase

It is a transitional process as we exit the workforce, not one long phase.  It could be a long stage depending on age of retirement and life span.  But it is multi-phase and must consider health, health of your spouse, state of finances, interests, etc.  Spending is not constant through retirement; a lot may initially be spent on travel, then perhaps a new car and home renovations, and eventually health needs.

Retirement is not a Destination

Life expectancy averages are about 80 for men, 84 for females. So retirement may be 20 to 25 years.  It is a different way of life to the 9 to 5 routine, one that requires planning and regular adjustment, just like you did for the 45 years you worked.

The myth of needing 80% of pre-retirement income

This is a rule of thumb pushed by financial planners, but there is less tax to pay, hopefully no loans to service, no money for children's education, no savings for retirement.  The real number may be between 50% and 65% of working-life income.  Consider your lifestyle - expensive or practical and reliable?  Go through the list of things you must spend on (rates, electricity, registration, insurance etc.) and those more discretionary (groceries, presents, eating out, etc.).

Income returns

Our approach is to achieve not only the best return on capital but also ensure return of the capital.  A few we have worked on recently are achieving better than 5%, with very low risk.  The portfolios can be simply re-jigged depending on your needs and the state of the markets.  Also, in these low-return times it may be necessary for you to draw some capital to ensure you can meet both essential and discretionary needs; don't go without so you can leave it all for the kids!

Equities

Many planners take their clients out of equities and only select safe fixed interest.  Inflation doesn't stop though and every year erodes  your savings.  Hence, some equities are necessary to provide growth and replace capital.  It is not simply about choosing a few token stocks though, but about all sources of income, asset allocations, and near and long term needs.

Retirement planning requires analysis of both future needs and income.  Don't leave it to someone else to make important decisions for you, and don't rely on the wrong assumptions.

[As you know, while we are associated with Merit for financial planning, we choose to refer to qualified, experienced people who we trust to do the assignment properly and thoroughly with your interests paramount.  So, if you want some general help or a point in the right direction, we would be pleased  to help with the principles, but for the actual product/investment selection we will refer to our trusted associates.]