Envision your ideal retirement: Are you relaxing on a beach? Starting a new hobby? Or finally taking that trip to Paris?
A comfortable retirement looks different for everyone, but most investors share some common goals. We’ve broken those down into 4 key categories to help you start planning. Determining how you prioritise these goals is the first step in creating a road map to financial security in retirement.
Basic necessities
Paying for food, clothing, and shelter must always come first. Health care expenses also fall under this category. Necessities are considered a “cash flow” goal, meaning they often require income from various sources, such as government benefits. These routine expenses are typically less costly than your other expenditures but occur more frequently. Because this category allows for the lowest amount of investment risk, it may be helpful to overestimate your future spending in this area.
“Just in case” savings
At some point in retirement, you’ll probably have a surprise expense, such as car repairs or a new roof. Having a rainy day fund can be reassuring when the unexpected pops up. Unlike necessities, this type of expense is an “asset reserve” goal, so you’ll want sufficient savings to cover these potential costs. Helpful tip: Maintain liquid investments that you can quickly turn into cash (or save cash itself) for these expenses.
Fun stuff
Consider hobbies and activities you want to enjoy in retirement. Even if it’s just an occasional meal at your favourite restaurant or a quick getaway, you should factor these types of expenses into your plan. Like necessities, this is considered a cash flow goal, so prepare to set aside a few dollars from different income sources.
Your legacy
Someday you may want to transfer your wealth to heirs or charities. For many investors, this goal is the lowest priority. If you do decide to share your money, those savings (like other asset reserve goals) are best kept in liquid investments for easier transfer of assets. Remember: You can always contribute to your legacy in non-financial ways too—like with your time.
Retirement may not be far away, but there’s still time to make a solid plan, either independently or with the help of a trusted financial adviser. Saving for—and prioritising—these goals can help put you on the road to financial security. After all, isn’t the ultimate goal of retirement to enjoy it?
Speak to us today on Phone 02 9548 3703 if you’d like to start planning for your retirement.
Source: Vanguard October 2021
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
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