Thinking about retirement when you’re young oftentimes feels pointless as it’s so far away. I felt this way for many years. But as soon as I had kids and saw how quickly they were growing up and how fast the years were starting to go, I realised that retirement will hit sooner than I thought.
I think it's pretty safe to say that your company and government aren't going to be able to support you. Counting on that is a huge mistake.
If you have no plan in place, you may not have enough to retire on and when you do pass away, will your assets be distributed where you want them to be if you're not here to manage them?
This article discusses some things to consider when planning for retirement.
How much will you need when you retire?
It's really hard to calculate this as inflation and cost of living play a big part. Depending on whether you own your home, what country you live in, and what city you live in will all impact your requirement.
If you do some searching online, you can likely find some good resources and calculations you can use. It's worth educating yourself on this and then setting a goal for how much you'd like to have for retirement. That way you can work backwards and get creative if you need to to reach that goal.
Putting together a will becomes increasingly important as you start to have children or start getting some structure set up in your finances. You want to make sure your possessions and wealth go to who you want them to go to.
There are simple will kits you can pick up or you can go with an estate planning lawyer. There are varying levels of complexity and it does come down to your personal situation. And the good thing is you can revise your will as much as you want so don't worry if your circumstances or priorities change.
I had a friend whose dad passed away a couple of years ago. His dad owned many rental properties and had several assets. The problem was, my friend's mum didn't have the information to take over the rental properties when her husband died. She didn't even know the password to his computer! My friend spent countless hours wrangling all the information together to get on top of the situation. It was really stressful and all on top of the fact his dad had just passed away.
It suddenly struck me that if myself or my wife died, worst case we both died at the same time, how would the executors get access to what they need to distribute our wealth?
The good news is, with a death certificate, an executor can get access to many things. But what if they don't know if a certain thing even exists?
So I decided to document a lot of what we had to help our executors.
I went super detailed and thought through the worst-case situation where we both died, our house burned down and all our devices were destroyed, how would my executors get to what they needed. You don't need to go this far so I encourage you to decide what works for you.
Here is a list of documents I put together and shared with our executors where to find them:
- Important Contacts (lawyers, accountants, mortgage brokers)
- Computer Recovery (how to access our devices, multi-factor authentication)
- Email Addresses (what we have and what they are used for)
- Investments (where our investments are held)
- Domain Names (what we have)
The goal isn't to give everything away but to create a trail they can follow in the event we weren't here.
Self-managed retirement funds
If you have a Superannuation Fund in Australia, a 401k in the USA or an equivalent elsewhere in the world for your retirement, chances are it's there chugging away as the money flows in. It's important that you understand the fees you're being charged and if possible, look at different options.
My wife and I set up a self-managed retirement fund (called a Self Managed Superannuation Fund) some years back which allowed us to take full control of our retirement savings and invest them accordingly.
Generally, you need a certain dollar figure amount to make a self-managed retirement fund worth it as there are accounting and audit fees we have to pay. But we like that we have control over it. I'd encourage you to explore if this is an option that might suit your needs and weigh up the pros and cons. Not everyone needs one.