When asked to nominate their favourite business book in a recent survey, ‘How to Retire in 12 Months” by Serena Star Leonard was the clear favourite. Retirement represents a significant change – not just financially, but in terms of lifestyle and purpose. Many small business owners and entrepreneurs choose to delay their retirement as they consider themselves fit and healthy, and their business interests fulfil their need for purpose. Whether you wish to retire in 12 months or intend to continue working whilst ever you are willing and able, the time will come when you will ask : “When can I afford to retire?”. Rob MacLean, my business partner and Principal Advisor for Equitas Partners, said most people don’t know if they can retire and only half of them are actually ready for the big event. With the life expectancy of Australian women being 85 years of age, it’s a question women should address well before they are faced with the situation.
“Retirement shouldn’t be a guessing game. It needs to be well planned and managed,” Rob said. “Money gives options. So the main thing to understand is whether you have sufficient money to have everything you need and everything you want to live on beyond your working life,” he explained.
In another recent poll conducted by the by the Australian Businesswomen’s Network, 40% of respondents indicated that they expect to retire between the age of 66 and 75.
At 66 years of age, as an Australian woman you will have, on average, 20 years of living to fund. So one of the first steps to assess whether you are ready for retirement is to determine your fixed costs of living (e.g. debt repayments, accommodation, insurances, utilities, food, etc.). Then, it’s essential to understand the ‘fun part of your life’ or in other words, the lifestyle and leisure you would like to pursue once retired and how much these will cost.Multiply this by 20 and you will have a sound guide as to the size of retirement nest egg you need. According to Rob, one of the most common misconceptions is that downsizing from a house to an apartment will also result in down costing.
“Many people choose to sell their house, which probably had no mortgage left, and move to a small, more expensive apartment closer to the city. Experience has shown there’s often no overall cost saving from doing this. In many cases, downsizing should be a lifestyle choice, not a financial decision,” he said.
Once you’ve identified your costs of living, including the essential and lifestyle expenses, it is time to develop a sound financial strategy that will help you grow and protect your wealth. The trick is to expand your working life by 10 years. This will make a big difference to your retirement nest egg. This information was prepared by Equitas Wealth Pty Limited and is current as at July 2014. The information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation and needs.
