Crystal Wealth Newsroom

When can I retire?

Money Tips

When it comes to working out when you can retire, the key is how much you spend – or want to spend – in retirement.

A good benchmark for retirement, says Crystal Wealth director Louise Lakomy, is $50,000 per year for a single person, and $70,000 per year for a couple.

And, ideally, that should equate to around 6% of your super balance annually.

“I usually say that you want to be drawing no more than 6% out of your super, to ensure that it maintains its capital value for as long as possible. Six to eight percent is what you want the super fund to be making each year, so in that instance, whatever return you’re getting, you’re living on.”

It’s important, says Louise, to maintain the capital value in your super in case you need that for expenses that may come in later life, or you want to leave a lump sum to children or grandchildren.

“You want to be in a position where you’re not going to run out of money. It’s common now for people to want to ensure they’re going to be able to leave something for their children, although I do think that, as time goes on, that’s going to change.”

“Really, though, it’s making sure that if a rainy day occurs, and you need to go into a retirement village or nursing home, or you need a lump sum of cash for whatever reason, there’s some access to capital. So, for example, if you’re a couple, one partner isn’t forced to sell the home to locate the other partner in a nursing home.”

When to start planning for retirement

When it comes to planning for your retirement, Louise recommends 45 is a good age to give it some serious attention.

“By 45, you’ve probably had your children if you’re going to have them, you will have your mortgage, you’ll have worked out where you’re living, and your job’s probably quite secure.

“Of course, that doesn’t apply to everyone, but if you start at 45 you’re probably giving yourself a 20-year timeframe to get yourself into the right financial position, which is plenty of time.

“At 45, you’ll have built up a decent super balance over the last 20 years or so, and then it’s ‘Okay, well, what are we going to do for the next 20 years?’”

Working towards retirement

For many, the prospect of one day stopping work suddenly isn’t necessarily an appealing one. Instead, says Louise, many people are choosing to cut back, as opposed to stopping outright.

“I often get clients asking, ‘Can I afford only to work four days a week?’ It’s a lifestyle decision, it’s not always about retirement.

“Most of us don’t truly retire until we’re a lot older, but it may be just reducing our workload over a 10-year period – maybe between 65 and 75.”

Louise recalls conversations with a client who is now reducing the amount of time she’s working.

“She was working full time, and wanted to reduce her hours to four days per week. We looked at her financial position, and reducing her hours wouldn’t negatively impact what we were working towards, so she cut back her hours.

“And then a few years later, she said, “Can I reduce it to three days?” She did. Now, she’s saying, I want to stop working. But every time, she’s come to me, and says, “Do you think I can afford to do this?”

“I think because we’ve worked in partnership with her over many years, she feels confident in taking that step. For her, it’s having the confidence to say, ‘Okay, well, someone else is helping me make this decision.’

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