Retirement income planning: 3 important questions you need to answer

Planning for retirement can be a daunting process, with pressures to get your finances and priorities in order. If you do not have a clear idea of how you want your retirement to look like, here are the three questions to help you get started on achieving your dream retiree life.

1. When do you want to retire?

Having a ballpark idea of the age you want to stop working can help you figure out how much savings and income you will have when retirement comes. These include sources such as superannuation accounts and Age Pension entitlements.

From here, you can calculate if these savings would be enough to last for the rest of your life. While no one knows how long their retirement will last exactly, it could be longer than expected. The current life expectancy for Australians is 82.5 years.

Knowing the timing will not only give a proper foundation to determine the costs, but it can also help you sort out career and life plans with your partner and family.

2. How much will you need in retirement?

Consider your priorities. Whether you want to travel, take on new hobbies, live on a farm or spend more time with your grandchildren, these options will bring different expenses and financial commitments to see through. Be as specific as possible with your wishes – how often you want to travel, what city you want to reside in – to gain an accurate picture of your future spending.

Health expenses and emergency spending should also be factored in, as well as inflation rates. Even with senior benefits such as Commonwealth Seniors Health Card, it is likely that your medical expenses will go up as you grow older.

3. How much do you have to save?

Saving early is the key. Most financial experts recommend committing 10 to 20 per cent of your income throughout the working years for retirement. However, if the numbers still come up short, there are some options to boost your retirement income.

Finding part-time work or investing in assets, such as shares or property, could lower your savings burden. You can also unlock wealth from home equity or other valuables at home. If you have real estate, there is also an option to top-up your pension with the Pension Loans Scheme.

Another way is to adjust your retirement plan and make compromises, be it moving to a lower cost area or cutting down on the less necessary expenses.

This article was written in partnership with Over60.