Retirement can feel a long way away until suddenly it is only a few years around the corner. You may have spent decades building your super, savings and investments, but approaching retirement raises a different set of questions.

When should I retire? How much will I need? Where will my income come from? What happens to my debt? And could I be eligible for the Age Pension?

You do not need to have every answer five years before retirement. But this can be an important time to start bringing the different parts of your financial life together. Here are some of the key areas worth reviewing.

Start With the Retirement You Want

Before focusing on super balances and investment returns, think about what you want retirement to look like. For some people, retirement means finishing work completely. For others, it may mean reducing hours, working part-time or gradually transitioning out of the workforce. It is also worth thinking about the lifestyle you want to enjoy.

Consider:

• When would you ideally like to retire?
• Do you want to stop working completely or transition gradually?
• Where would you like to live?
• Is travel important?
• Are major purchases or renovations ahead?
• What hobbies, activities or experiences do you want retirement to include?

You do not need every detail worked out. A broad picture of the lifestyle you want can help shape the financial strategy needed to support it.

Work Out What Retirement May Cost

There is no single figure that tells everyone how much they need to retire. Your retirement income needs will depend on your lifestyle, expenses, debts and personal circumstances. A useful starting point is your current household spending. From there, consider how your expenses may change once you stop working. Some costs may decrease, such as commuting and work-related expenses. Others, including travel, leisure, healthcare and home maintenance, may increase.

Your retirement budget may need to allow for:

• Everyday living expenses
• Housing and utilities
• Transport
• Health and medical costs
• Travel and entertainment
• Family support
• Unexpected expenses.

Retirement spending can also change over time. Many people spend more on travel and experiences earlier in retirement, while healthcare and support costs may become more important later.

Understand Where Your Retirement Income May Come From

While you are working, most of your income may come from your salary.

In retirement, income can come from several different sources, including:

• Superannuation
• Personal savings
• Investments
• Part-time work
• The Age Pension or other government entitlements.

The important question is how these sources work together. How you access super, use investments and draw on savings can influence how long your money lasts, your tax position and potentially your eligibility for government support. Retirement planning therefore involves more than checking your super balance. It means looking at your overall financial position and creating an income strategy around the lifestyle you want.

Give Your Super a Five-Year Review

As retirement gets closer, your super deserves more than a quick balance check.

Consider reviewing:

• Your current balance and contributions
• How your super is invested
• The level of investment risk you are taking
• Fees
• Insurance held through super
• Beneficiary nominations
• Whether you have multiple super accounts.

The investment approach that suited you earlier in your working life may not necessarily be the right fit as retirement approaches. That does not mean avoiding investment risk altogether. It means making sure your investment strategy remains appropriate for your goals, timeframe and wider financial position. It is also important to consider your super alongside your savings, investments, debts and potential government entitlements rather than looking at it in isolation.

Decide How You Want to Transition Out of Work

Retirement does not have to happen all at once.

You may choose to:

• Retire completely on a particular date
• Gradually reduce your working days
• Move into a less demanding role
• Continue consulting or casual work
• Work part-time for income, routine or social connection.

For some people, a Transition to Retirement strategy may also be worth considering. Depending on your eligibility and circumstances, this can allow you to access an income stream from super while continuing to work. Because this can affect your super, tax position and future retirement income, it should be considered as part of your broader retirement strategy.

Review Debt Before Retirement

Debt can have a significant impact on your retirement budget once your regular employment income stops. That does not necessarily mean every debt must be fully repaid before retirement. A more important question is:

Will your retirement income comfortably support the repayments?

Review any home loans, investment debt, credit cards, personal loans and other repayment commitments you expect to carry into retirement. You may also need to consider the trade-off between reducing debt, making additional super contributions and keeping savings available. The right approach will depend on your circumstances, interest rates, future income needs and the type of debt involved.

Understand Government Entitlements

The Age Pension and other government benefits can form an important part of retirement income for many Australians. Eligibility can depend on factors such as your age, income, assets, relationship status and how your finances are structured. It is important to consider government entitlements alongside your wider retirement strategy. The way you hold investments, draw income or use super may influence both your cash flow and your eligibility for support. Because rules and thresholds can change, it is worth reviewing your position as retirement approaches rather than relying on old assumptions.

Review Insurance and Estate Planning

Retirement can also be a good time to review the arrangements you have in place to protect yourself and your family. Your insurance requirements may change once you stop earning employment income, so consider whether your existing policies still suit your needs.

It may also be worth reviewing:

• Your will
• Enduring powers of attorney
• Beneficiary nominations
• How your assets are owned
• Broader estate-planning arrangements.

Super beneficiary nominations are particularly important because superannuation may be treated differently from other assets in your estate. Your estate plan and super nominations should therefore be considered together.

Your Five-Year Retirement Countdown

The retirement planning process can feel more manageable when it is broken into stages.

Five years before retirement: Clarify your lifestyle goals, review your financial position, estimate your expenses and understand where your retirement income may come from.

Three to four years before retirement: Review super contributions, debt, investment risk, insurance and how you may transition out of work.

One to two years before retirement: Confirm your intended retirement date, finalise your budget, review government entitlements and decide how your super, savings and investments may provide income.

The final six months: Put the strategy into action by completing retirement-income arrangements, updating your budget, reviewing your estate documents and confirming how your regular income will be paid.

Retirement Planning Doesn't End When You Retire

Your final day of work is not the end of your retirement plan. Your spending, income needs, investments and personal circumstances can continue to change.

A good retirement strategy should bring your lifestyle, super, investments, income, debt and future expenses together rather than treating each decision separately. A Setch Group adviser can help you understand where you stand, review your options and develop a retirement strategy that can adapt as your circumstances change.

Planning to retire within the next five years? Speak with Setch Group about building a retirement strategy around the future you want.