How To Plan For Retirement

Wednesday 17 Apr 2019

PLANNING FOR RETIREMENT The average retirement age varies yet most retire from the full time workforce in Australia at 65 years of age. Life insurance companies suggest 25 to 30 years in financial planning prior to retirement. As the average Australian is living longer than previous generations, there is a growing trend towards retirement beyond the age of 65 years. Retirees should consider the following when working beyond the average retirement age: •You’ve received medical advice about your health to consider working longer. •You’ve considered working part time as opposed to full time work. •You have spoken to your financial planner about the impact on your superannuation. •You have discussed this arrangement with your employer in advance. REVERSE MORTGAGE Reverse mortgages help unlock access to the wealth tied up in your home, but… •They may leave you with too little equity in the future, affecting your financial capacity to move into supported accommodation. •You may fail to adjust your lifestyle to your post-retirement reduced income and you may not be in a position to leave an inheritance for your children. RETIREMENT VILLAGE Most retirees choosing to move into a retirement village or retirement home prefer it to a private property because: •They no longer want the responsibility of maintaining real estate. •The community of a retirement village usually offers social interaction and activities, reducing the sense of isolation experienced by some. •Villages are frequently well positioned in terms of public transport, making it easier to continue to enjoy a normal lifestyle when driving is no longer an option. Most retirees consider a retirement village or retirement home if the gardening, housework and maintenance has become more than they can easily manage. However, make sure you’ve considered alternatives like local community home help, a handyman or moving to a smaller nearby apartment first. Other reasons to move could be: •You’ve lost your partner or spouse and have allowed yourself adequate time to adjust before making such an important decision. •You believe the social or religious activities available in a village would appeal to you. •You can see the time approaching where level access, doorways that can easily fit wheelchairs, and other support would be handy. •You’d feel more relaxed knowing emergency assistance is readily available. •You feel you’d appreciate being part of a village community and the social interaction it offers. ASSOCIATED COSTS There are many different types of retirement villages and retirement homes and the financial implications of your choice can be complex. It is important you have sought the advice of a solicitor, lawyer or financial advisor and you fully understand the costs of entry, residency, exit and who pays what bills. •There is usually an initial entry price, recurring service charges and a departure charge when you leave. •There are a great many departure fee structures so it’s vital that the structure you are considering is explained to you. •Ask the village you are considering for comprehensive information about its fees and charges then seek professional advice. Most retirement villages and retirement homes charge an entry contribution of some sort and this usually goes toward ongoing updates to the common property and individual homes/units. •If you have limited funds, some villages may offer an apartment and negotiate a small donation of several thousand dollars. PENSION A complex range of factors affects your pension so it’s important to speak to Centrelink for detailed advice. •Your pension and/or rent assistance situation might be affected. •Centrelink will assess any entry costs you may incur. •Contact Centrelink to discuss your individual financial circumstances. STAMP DUTY •If the village you are considering offers a title over your property, then Stamp Duty will be applicable. •If you are entering a leasehold arrangement, Stamp Duty is not applicable under current legislation. RIGHTS Living in a retirement village or retirement home requires an appreciation of the rights of neighbours in much the same way as living in an apartment building. •Whether you own the title to your property or whether you enter a lease, you generally enjoy a similar level of security to that of owning your own home. •Make sure your legal representative reviews the terms and policies of your proposed village and explains the implications before you sign any contract. MAINTENANCE The owner of the retirement village or retirement home generally maintains buildings, common property, recreational facilities and garden areas. While every village is different, individuals are most commonly responsible for: •Private outdoor areas. •Interiors. PETS Companion animals are of enormous value in our senior years and the good news is that some retirement villages and retirement homes share your enthusiasm for pets. •Check the individual village’s pets policy. •The type of pet, its size and temperament are likely to be factors considered in the village’s policy. •Villages where homes are well-spaced are more likely to allow pets. •However, some villages don’t allow ‘replacement pets’ in the event that your pet passes away. USING SUPERANNUATION Many Australians are now buying investment property using their Self-Managed Super Fund (SMSF) but it’s important to get professional financial advice. •The property you buy must be held in a ‘warrant trust’, ‘bare trust’, ‘special trust’ or ‘purchasing trust’ •You cannot directly benefit from any retirement property you buy using your SMSF before your retirement, under current legislation. ASSISTED LIVING OR INDEPENDENT LIVING Assisted living commonly refers to having nursing staff on hand within the retirement living premises to help retirees. Their responsibilities often include cooking meals, washing, cleaning and after hours care. Independent retirement living in villages and homes do not offer nursing staff but rather administrative services. Retirees should consider assisted living when: •You’re having difficulty managing daily routines such as cooking, housework and moving •You’ve received medical advice concerning your health •Your partner requires increased supervision that you cannot provide. SEA CHANGE OR TREE CHANGE Some of the more popular lifestyle change locations around Australia are: Victoria – Golden Beach, Geelong, Ninety Mile Beach, Gippsland, Lakes Entrance, Phillip Island, Mornington Peninsula, Warrnabool NSW – Gerringong, Wollongong, Newcastle, Hunter Valley, Mudgee, Coffs Harbour, Mullumbimby, Murwillumbah, Kyogle and Casino, Nelson Bay, Ballina SA – Middleton, Naracoorte, Limestone Coast, Adelaide Hills, Fleurieu Peninsula, Seaford WA – Binningup, Bunbury, Margaret River, Mandurah, Geraldton QLD – Tannum Sands, Cairns, Caloundra, Sunshine Coast, Gold Coast Tas – Low Head, Penguin, Hobart, Huon Valley If you’ve handled change well in the past, a major change can enrich your lifestyle. However: •It does not necessarily guarantee a calmer, more happy existence •It’s more likely to be a happy move if you’ll have a support network in the new location •If you’ll miss family and big city access to medical services, convenience stores, take away food outlets and restaurants, you may not like the change •It’s vital that the climate of your new location suits your health disposition TIMING For most of us, this is one of the toughest questions. Before selling to move to a retirement village or retirement home, make sure you’ve considered all the alternatives and you’re convinced it’s the right move for you. The reasons you might decide to sell are: •You don’t need as much space as you used to and a smaller home would be easier to maintain. •You need more cash for day-to-day expenses and most of your wealth is locked up in your home. •You feel your home may sell for more now than it might next year. You could consider selling now and renting until retirement. •You’ve properly prepared your home for sale and it is presented at its best. Check out our resources area for more tips on ‘Preparing your home for sale’. •You’ve consulted a few real estate agents and a financial advisor. You’re comfortable that you’ll achieve a price that will help you achieve your financial goal. DOES AUCTION OR PRIVATE SALE GET THE BEST PRICE? Both methods of sale have their merits so it is important you discuss which is best for you and your property with us at First National Balwyn North. We’ll help work out what’s best for you but here are a few tips: •Auction allows buyers to publicly compare their offers for your home placing bids but your agent needs to be confident your property will attract more than one interested party during the marketing period. •Auction can achieve a high price, if two buyers really desire your home. •With Private Sale, you must determine an appropriate asking price which will then attract buyers who compete against one another in a silent bidding system for your property. •When you set a price at the current market with Private Sale, you will attract multiple potential buyers and together with your agent’s negotiation skills, First National Balwyn North will achieve the highest price possible. •If you set too high a price with Private Sale, your home is unlikely to attract any offers and will remain on the market for a lengthy period. Potential buyers become suspicious about why nobody else seems to want to buy your property and this makes them less willing to pay fair market value. RENTING AND THE PENSION A complex range of factors affects your pension so it’s important to speak to Centrelink for detailed advice. •Your pension and/or rent assistance situation might be affected if, by leasing, your assets increase. •Centrelink will assess your personal financial circumstances. Contact Centrelink. EARLY RETIREMENT Most people dream of an early retirement but if you’re not lucky enough to win a lottery ticket or have a substantial financial windfall, it is important to assess the positive and negative impacts of an early retirement. •Will your superannuation be sufficient to meet your financial needs? •Do you have travel plans, hobbies or part time activities to maintain your interest? •Have you discussed the implications of early retirement with your family?