4 Steps To Understanding Your Retirement Income


Retirement might seem like a long way off for many of us, but it’s never too early to start thinking about how you will fund the later years of your life.

Retirement might be a great time to travel the world or take up all those hobbies you haven’t had time for in your working life.

From budgeting to investing your money, follow our guide to set yourself up for the perfect, well-funded retirement.

4 Steps To Understanding Your Retirement Income

Steps To Understanding Your Retirement Income

Step 1: Plan now

Whether in your 20s, 30s, or 40s, you must start planning your retirement income. You might not know how your life will be in your 60s or 70s, but it’s time to start envisioning so you can budget.

Consider any travel or social expenses you might have with your newfound free time (don’t forget about increased prices and inflation). You also need to factor in health bills and medical expenses, as bleak as they seem.

However, the good news is that many of your current costs, such as childcare or mortgage repayments, should be over with, freeing up your income.

Start by working out how much, on average, you will spend each year of retirement. Then consider how much you should put away now to budget for this lifestyle. While you don’t have to skimp on luxuries, be aware of trimming your expenses where you can — that money might go to better use in your retirement. With life expectancy on the rise, you may need to prepare for an extra ten years or so of income. 

Step 2: Retirement income

Your retirement funds come from several sources. You can access your super fund from the ages of 55-60. You might also be eligible for the Age Pension.

However, these are not necessarily enough to support you in your later years. You might also want to start saving your pension through investments.

Step 3: Invest your money

Investing your finances is a priority when it comes to saving for retirement. On average, investment returns account for 60% of retirement income.

You can control your investments, from how much you put into them and where they go. When deciding where to invest your money, consider what corner of the market has reasonable return rates. If you’re unsure where to start, consider what you’re interested in. Invest your money in an industry you’re enthusiastic about.

You will also want to take into account your risk level. Are you prepared to invest your money in volatile but potentially high-reward stocks? If you’re unsure, you can trust your money to an expert investment manager to deal with the specifics.

Step 4: Don’t worry about the setbacks

The road to riches for your retirement isn’t smooth sailing the whole way. At times your investments might plummet, but stay calm as they should generally produce a positive yield.

Or you might have a sudden emergency bill that pauses your careful budgeting. The key is to avoid touching your savings but allow yourself an emergency pot for such scenarios.

You might be setback by an unfortunate, but sometimes unavoidable, divorce or separation from your partner. A split can rupture your goals if you have been saving for retirement and budgeting each other into your plans.

The cost of the divorce itself might also be an added expenditure you had not considered. In such a situation, you and your partner must divide your assets, including your retirement funds and investments. 

Summing up

Planning for retirement may seem daunting when you first add the figures and costs of living over 30 odd years. However, don’t let it overwhelm you, as you have plenty of time to reach your goal.

Investing your money and carefully budgeting your savings will quickly add to a healthy pension pot for you to enjoy in your retirement.

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Author Bio: Luke Fitzpatrick has been published in a variety of publications such as Forbes, Tech In Asia and The Next Web. He is also a guest lecturer at the University of Sydney, lecturing in cross-cultural management and the pre-MBA program.