Retire early and live the life you want
02 Feb 2015
Do you want to retire early? For a lot of people the automatic answer is yes. Although this means more leisure time it also means you have less time to plan and create wealth to make this a reality. The only difference between early retirement planning compared with conventional planning is time so it’s best to start as soon as you can. The usual retirement period is approximately 30 years but if you want to retire early it could be 40 or 50 years. Due to this you will have less time to plan and reach your goals together with needing to make your money last longer. To assist start planning there are a number of factors to consider, such as:- Lifestyle: how much will I need to maintain the lifestyle I want; Investments: do I have the right investments to generate sufficient income; Savings: do all my savings need to be held in super; Work: can I work part-time if I want; Government Pension: if I am eligible for an aged pension how will my super affect it; Should I have a funeral plan? Once we can ascertain your needs and goals there are some things to focus on to determine if early retirement is an option:- Retirement planning involves strategies to assist building wealth based on income and investments. The earlier you retire the less income is available to accumulate assets and reduces time for compound growth on investments. Accordingly some people may prefer to invest in higher growth assets and borrow funds to leverage the investments but this will increase your exposure to more risk. Inflation is another topic to take into consideration. A dollar today won’t be the same as a dollar next year, or the year after and so on. You must ensure the income earned on your investments at a minimum keeps up with inflation otherwise you may need to sell assets to access funds. If you retire early you will not be eligible for the Aged Pension for a longer than normal period. During this time you will need to fund your lifestyle purely on your investments and savings. With the government gradually increasing the retirement age this period could be longer than imagined. Depending on your year of birth, you may not be able to access your super until you reach age 55-60. If you have unrestricted non-preserved super this can be withdrawn early however for a lot of people this is not a component of their current arrangement. There are restrictions on the amount that can be invested in super and this would mean having savings outside super which means you will miss out on the reduced tax rate offered for super. The idea to retire early can be really appealing and an important thing to remember is – plan. If you don’t have a plan how do you know what you want to achieve and implement the steps to get there. Something else to remember is early retirement does not mean not working, you can choose a Transition to Retirement plan which includes options such as reducing work hours, going part-time, casual work and even volunteering. General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please do not hesitate to contact an Intralink adviser should you wish to discuss this further.