Four of the most useful questions to ask before retiring are when you’d like the option to stop working, how you want to spend your time, what that lifestyle might cost and whether your current home will still suit you. You can start planning with rough answers. If you’re torn between two retirement ages or unsure whether you’ll move, those are options you can compare as part of your plan.
One of the things I often hear from people a year or so into retirement is that they wonder how they ever had time for work. I always enjoy hearing that. Before you finish work, though, it can be surprisingly hard to imagine what you’ll do on an ordinary Tuesday when the day is yours.
I talked about this in the Are You Ready to Retire? How Many of These 7 Questions Can You Answer? episode of the Financial Autonomy podcast (listen below). I’ll take you through four of the seven questions we work through with clients at Guidance. Our free Retirement Readiness Guide goes into more detail on these four and covers the other three. Each question ends with a ‘What to do now’ section so you can start working out your own answers.
1. When would I like the option to stop working?
You might enjoy your work and have no particular retirement date in mind. I find it helpful to ask at what age you’d like to have the choice to finish. You can plan towards having that choice and decide closer to the time whether you actually want to take it.
For now, think about an age you’d like us to explore. If you have a partner, it’s worth talking about whether you both picture finishing work together. One of you may want to keep working for longer.
That gives us something to test against your finances. The guide helps you think through retirement timing, including how we can compare different ages if you’re unsure. Your first answer is a starting point that we can revisit as your plans develop.
2. What would I like my week to look like?
In our experience, the people who seem happiest in retirement tend to have thought about how they’ll spend their time. Work gives your week a structure, and it can take some thought to imagine what will replace it.
Try picturing a week after you’ve returned from that first big trip. Perhaps you’d spend a regular day with the grandkids, play more golf or have time to help an ageing parent. Pick something you’d look forward to doing regularly.
That begins to give your retirement plan some shape. In the guide, we help you develop a list of what you’d like to do and consider what those plans might cost. Some may need their own budget, while others may simply need the time you’re hoping retirement will give you.
3. How much might that lifestyle cost?
I wouldn’t expect you to know this off the top of your head. Your current spending is a useful place to begin, but it needs some thought about what could change once you finish work.
For example, you might have a company car that needs to be returned when you retire. Buying a car of your own could be a sizeable expense just as your salary stops. At Guidance, we allow for purchases like that separately from ongoing costs such as groceries and bills.
As a starting point, think about one expense that could disappear when you retire and one that might increase or be added. That helps you see why your current spending and your retirement spending may be different.
The guide then walks you through how to work backwards from your finances to estimate what you spend now. From there, you can begin adjusting for the life you have in mind, with a clearer basis for the figures.
4. Will my current home still suit me?
Start by thinking about what might make you want to move. It could be a smaller garden, fewer stairs or being able to walk to the shops. Having an idea of what you’d want from your next home helps you think more realistically about what a move could cost.
We’ve worked with plenty of people who moved into a smaller home in retirement and paid more for it than the home they sold. They wanted somewhere newer or in a location that suited them better, and that came at a higher price.
Before assuming a move will free up money for retirement, it helps to look at the sort of home you’d actually choose. The guide explains what to compare so you can make a conservative estimate of the financial impact. Even if a move is years away, that estimate gives us something to work with when exploring your retirement options.
Work through your answers with our free Retirement Readiness Guide
You may now have a retirement age you’d like to explore, a few ideas for your week or a clearer sense of what you still need to work out.
Our free Retirement Readiness Guide helps you take those first thoughts further. It goes into more detail on all four questions above and covers three more, with a checklist to rate how clear you are on each answer.
Each section ends with practical ‘What to do now’ steps. You can use them to start putting figures around your plans and bring your questions to an appointment with us.
Do I need all the answers before I book an appointment?
You can book while you’re still figuring it out. In my experience, people sometimes put off retirement planning because they think they need to come in with a date and a budget. If all you know is that you’d like to work less in a few years and you’re wondering whether you can afford to, we can start there.
At your first meeting, we’ll talk through what you’d like to do and where you’re unsure. If we build a retirement plan together, we can use your finances to compare different options and help you see what each could mean for you. Working through those questions is part of what we do.
Paul Benson is a retirement planning expert at Guidance Financial Services, helping Australians live the retirement they want. He hosts the Financial Autonomy podcast.
This article is for educational purposes only and does not take into account your individual circumstances. If you would like tailored advice, we can help you work through the numbers properly.
