For many, the word ‘retirement’ is associated with the idea of extended holidays to far-flung locations or spending quality time with grandchildren. However, there are a range of financial, emotional and psychological fears that are often linked to retirement – and for good reason.
Australians spend most of their working lives saving so that when the time comes to retire, they can lead a comfortable life. However, many are uncertain about what to expect. There are also the emotional and psychological impacts of transitioning to retirement to be considered.
Research from CoreData found that around 50% of Australians retire early due to unexpected circumstances and within timeframes they did not choose. This can result in retirees feeling out of control and impacted not only financially, but emotionally as well.
Retirement planning is not a ‘one size fits all’ approach. But no matter what an individual’s needs are, solid financial planning allows for a smoother transition and helps alleviate uncertainty.
Successful retirement factors
A successful retirement involves more than just money. Other important factors include mental and physical health, having realistic expectations and owning a home.
Retirement satisfaction occurs when a retirement lifestyle matches the retiree’s expectations. Not every retiree has expectations of a luxurious retirement lifestyle, but all of them expect basic needs to be addressed.
There are two core factors that determine the amount of savings a retiree needs - life expectancy and projected expenses. Individuals need to consider these, along with other factors including marital status, health and home ownership, when determining how much saving a retiree needs in order to enjoy their desired lifestyle.
Research from the Australian Centre from Financial Studies found those who retire early due to health issues are likely to have lower incomes and lower superannuation balances. By default, they are also most likely to incur additional health-related expenses in retirement.
Owning a home
Unsurprisingly, owning a mortgage-free home provides a greater sense of security and retirement satisfaction. Research from the Australian Housing and Urban Research Institute found older people with secure long-term accommodation tend to have better physical and mental health too.
Home ownership is also intrinsically linked to retirement readiness and satisfaction. Those who own more than one property with no mortgage typically experience retirement success. Single property owners also enjoy a high level of retirement satisfaction. In contrast, individuals who own no property score the lowest.
Retirement is one of the single largest changes in an individual’s life and it comes with a host of financial, emotional and psychological fears. A sound financial plan can help manage associated fears and expectations and most importantly, ensure the transition into retirement is as seamless as possible.
Talk to us
Enlisting the help of an expert, such as a Financial Adviser, can assist in developing appropriate strategies to help you meet your retirement goals.
Source: Fidelity Australia