Retiring means bidding goodbye to your daily eight-hour work as you transition to another phase of your life, usually because of old age.
If you would like to spend your retirement without worries, you need to make early investment decisions, maybe open a savings account, apart from the annual minimum income contribution you pay for your pension.
The idea of retirement planning has changed over the years though the core concept has remained the same. Basically, you could have the financial security if you have good investment planning.
In doing so, you should consider how much amount of money you need to help you transition to your life after work depending on the types of retirement.
What are the different types of retirement?
In the past, retiring means leaving your work for good after working for several years. Today, retirement may have a varying timeline and different age group as well. This is an element of retirement planning that you should account for, especially if you will retire a year from now. You would want to be prepared first and have all the information you need before retiring.
- Traditional Retirement
This is the standard model of work across most companies. After many years of working, people around the age of 60 will retire to enjoy the last decades of their lives. The financial aspect of retirement is supported by company pension, personal savings from income, and government aid. This minimum fund is based on the traditional pension.
- Early Retirement
Before the usual time of retirement or even a year earlier, you might like to take a rest from working. And you could do that: take the opportunity to start living outside of work earlier and get that balance of having a social life, or be at home with family. You must, however, think this through because early retirement needs much more financial security and investments. If you have one now, you might want to make it even more profitable so you can live without worrying access to income.
- Temporary Retirement
There comes a time when you want to take a break from your work to have a social life or be a member of an adventurous group to have new experience. Or you’re convinced to be home-based to work on your interests. For whatever reason, it is your business. But there is still part of you that wants to work after many years of break.
This type of retirement, temporary, may be opted so you can receive like a 10-year break before returning to work. Just make sure you have the fund and assets to support this choice.
Types of Pension Programs in Australia
As a key component of your retirement plan, you should have a pension program—similar to 401 K—to help you transition into the new life after work. In Australia, the savings practice is through superannuation. It is an account where employees make their contributions, usually without any tax implications, to grow until you retire or decide to withdraw. One says this is beneficial because securing your financial position is important when you do not have a regular source of income.
- Transition to Retirement pension
Building your assets should be included in your plans when retiring. This allows you to withdraw money from your super once you reach preservation age despite working full-time, part-time or casually. You may withdraw 2 per cent to 10 per cent of your super savings.
- Account-based pensions
This plan allows you to have a regular income stream from your savings once you meet the superannuation condition of release.
It programs a series of regular payments over a specific period, which depends if you chose a fixed-term or lifetime annuity.
- Government’s Age Pension
It is a government-sponsored benefit provided to eligible Australians who are in the appropriate age, which varies. You should also comply with the income and assets test, among others.
Which one is the right retirement for you?
The right choice actually depends on your financial situation and needs. If you wish to keep on working for now and delay retirement, go for the traditional. If you have enough money to get by, you can go with early or temporary retirement. Whichever you choose, just make sure to maximise the time you are allotting for retirement. You deserve a break from work, after all.
What are some retirement benefits?
Retirement benefit is the amount payable to the members of a certain pension scheme following their retirement or early withdrawal. It includes the following:
- available benefits coming from a previous employment
- currently funded retirement pensions
- benefit from present employment
Retirement benefit is being offered because it can serve as motivation for employees to remain productive, especially if they are based on profits. For the companies, they are receiving tax advantages if they are providing such perks. More importantly, it allows you to have a refuge once you stop having a regular income stream.
Aged Care Weekly, Australia provides a vast read about retirement planning. Browse through them for more information.