This episode is the third in our retirement planning series. Last episode we looked at where you should focus if you are five years away from retirement, and in the episode prior we considered 10 years out from retirement. Normally once you get to the third part of a series, you’d kick off by saying that listeners should go back and listen to the earlier 2 episodes if they haven’t already. However in this instance that’s really not necessary. If you are listening to this because you are indeed one year out from retirement, then maybe the prior 2 episodes aren’t compulsory listening. Although if you can spare the 10 minutes or so, at least give the five year episode a listen, as there’s likely to be some ideas there that you can still embrace now.

One year out from retirement is where everything comes together. You’ve done the work—but now it’s about making sure everything is ready. Importantly too, at this point, confidence is a high priority. You want to know you have all your ducks in a row, and there won’t be any nasty surprises.

1. Nail Down Your Retirement Income Plan

In the planning up to this point we will have been working on an assumed level of required income once you retire. With retirement now imminent, double check what you are spending, and ensure your planned retirement budget will be enough for your needs.

Next, you want to get clear on where this income will come from. Usually the majority, if not all of your retirement income, will be paid from superannuation, given this is a tax free source.

You may however also have some income from a rental property or perhaps some share dividends. If your share portfolio is currently set to automatically reinvest the dividends, consider switching that off once you retire, so you can enjoy the benefits of the dividends your investments produce.

Finally, will you qualify for the Age Pension? If so, it might be helpful to have a sense of what you might get from this source.

Get your modelling refreshed and ensure your plan remains robust long term. Finding out at 78 that you should have worked an extra few years is not the situation that you want to find yourself in.

2. Build a Cash Buffer

Markets will move. That’s inevitable. So having 1–3 years of spending in cash or defensive assets reduces stress and crucially, avoids the need to sell investments at a time when markets have dropped. I mentioned this in the last episode on the section regarding sequencing risk.

We would typically build this into your Account Based Pension investment allocation – an Account Based Pension is what most super funds convert into upon your retirement. But you will likely also retain some cash outside of super as an extra shock absorber.

3. Are your goals still right?

Hopefully we began working towards your retirement plan at least 5 years ago. At that time you set a series of goals. But life moves on, relationships evolve, and the world changes. With retirement imminent, it’s worth reflecting on whether any changes are needed. You haven’t finished up at work quite yet, so it’s not too late recalibrate if that’s necessary.

4. Plan Your First Year of Retirement

Retiring is a big life change that requires significant adjustment. It’s worth thinking about what will get you out of bed in the morning once the 9am team meeting is a thing of the past.

Consider:

What does the first 3–6 months look like?

What routines will you build?

Are the clubs to join or courses to enrol in, that you should be taking action on now?

The smoother the transition in your first year, the more enjoyable retirement becomes.

So to summaries my suggestions for you when you are a year out from retirement:

1. Nail Down Your Retirement Income Plan

2. Build a Cash Buffer

3. Are your goals still right?

4. Plan Your First Year of Retirement

I hope you found this series helpful. If you’re an existing Guidance client and this series has prompted any extra thinking at your end, be sure to raise it at our next progress meeting, or drop us an email.

If you’re not yet a Guidance client and would like help building your retirement plan, schedule an initial meeting via our website. We’d certainly love to help you have an enjoyable and worry free retirement.

As always, share this episode if you’ve found it helpful, and check out the show notes for other ways you can interact with the Guidance team.