What do I need to know for my transition to retirement?

Transitioning to retirement is an important process that should be carried out with ample time and with a particular strategy in mind. It is crucial to ensure that your retirement plan is water-tight with enough flexibility to adapt to any unforeseen changes. The following article will outline some of the non-negotiables that you should consider as you plan for your retirement.

  1. Risk

The first non-negotiable that needs to be considered is the different risks that will be present in your transition to, and during your retirement. Investing is a risky activity; however, it is important that you have adequate safeguards to protect your nest egg during retirement.

Market risk:

Market risk refers to the market fluctuations that occur on a daily basis and over time. Market risk can be seen to have a bigger impact on retirees who do not have a regular income stream and therefore market downfalls could be detrimental when you are drawing an income from savings that are not growing as a result.

Inflation risk:

Inflation can impact retirees as an increase in prices is passed onto buyers through a rise in the costs of goods and services in the market. Therefore, it is important that retirees have their investments structured in a way that keeps up with inflation so that they do not lose additional purchasing power as a result of inflation.

Longevity risk

With increasing life expectancies, longevity risk poses the problem that a retiree may outlast their savings. In the early phases of retirement, you may need more discretionary income for travel and other retirement hobbies. However, this may also increase later in your retirement due to the potential need to spend more on health and aged care expenses.

  1. Spending patterns

As you are no longer working, your spending habits are likely to change in retirement. It is likely that you may save in some areas such as work expenses, transport costs and other costs such as school fees. However, it is likely that other costs may increase, as you have more time to spend on hobbies and travel. In conjunction with this, you will still be required to pay bills, service your car and put food on the table. These may also be increased by additional health or medical costs and if you have any dependents such as adult children living at home.

  1. Tax

As you transition from your working role into retirement, it is likely this will impact your marginal tax rate as you are no longer generating the same level of income. This may have implications on the asset classes you choose to invest in. An adviser can assist you with ascertaining the most appropriate mix of assets that can continue to grow your wealth effectively whilst ensuring that your portfolio is set up to minimise the tax you will have to pay.

  1. Interest rates

Another consideration for retirees to take into account is the impact of interest rates on their investments. Although low-interest rates may be advantageous for homeowners making mortgage repayments, this is not the same for retirees. In retirement, you are more likely to invest in more conservative or defensive assets due to a more cautious risk profile, and therefore low-interest rates mean that the yields for bonds and term deposits are lower. To read more about how rising interest rates could impact you, click here.

  1. Age Pension

Generally, to be eligible for the Age Pension, you must be age 66 or over, be an Australian resident or have lived in Australia for at least 10 years, and meet the income and assets tests. To find out more about the Age Pension and government benefits, click here. It is important for retirees to remember that these regulations are constantly evolving and therefore it is important that individuals remain informed of the changes. If you would like further assistance to devise a retirement plan or to assess your investment suitable for retirement, please click the link to organise a complimentary 20-minute phone call with an EPG Wealth adviser.

This information is purely factual in nature. Please do not rely on this information to make any financial decisions as this information has not been tailored to your personal. circumstances. If you would like financial product advice or services please let me know and I will set up an appointment for you. Any advice in this email is of a general nature only and has not been tailored to your personal objectives, financial situation and needs. Before acting on this advice, you should consider whether it is appropriate having regards to your personal objectives, financial situation and needs. Before making a decision to acquire a financial product, you should obtain and read a Product Disclosure Statement (PDS) relating to that product, it is important for you to consider these matters and to seek appropriate advice. The material contained in this email is based on information received in good faith from third party sources, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Past performance is not a reliable guide to future returns. Licensee EPG Wealth Pty Ltd 529273 – associated employees or agents may have an interest in or receive monetary or other benefits from the financial products and services mentioned in this email.



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