The Subtle art of Retirement

Retirement is an interesting concept. For most of our lives we’ve been conditioned to work for 45 years (ish) and then retire around the age of 65 66 67 (and counting). For many kids today it will almost certainly be age 70 or more. Retirement is generally accepted as leaving a paid position permanently and either being self funded or on a pension for the rest of your life. The age worldwide varies though, for example France is currently in a a state of revolt over Macrons proposed changes to increase the pension age from 62 to 64. This is not something the French agree with, and they do have priors for removing people in power……..often with sharp instruments!

As a concept it’s been around since the 1700’s but more widely adopted after the industrial revolution. We don’t work as physically hard or long as people did then, and we live much longer which presents both challenges of funding a retirement .

So is it time to redefine the concept of retirement? Most people still want to do something constructive with their time and there is only so much golf and travel you can do especially with the cost of living being what it is. Volunteering your skills carries huge benefits personally and communally. Mens sheds for example have over 1200 sheds and 50,000 members involved, so I guess if retirement in the traditional sense is for you, then make sure you’re communally involved and stay active.

Personally I can see myself ‘working’ until I’m in my late 70’s or beyond for many reasons. I stay fit, and keep healthy and my job allows me to help clients that in some cases I’ve known for more than 20 years and have helped them pay off homes and acquire investments. I love talking to the next generations about gaining a foothold in the property markets - for me I’m earning a living from something that brings tremendous rewards at a personal level and I cant imagine not doing it.

The majority of 60+ year olds present an opportunity for employers to have skilled, experienced staff around - an invaluable commodity in todays society and something that boosts the self worth and esteem of the individual. Additionally there is the financial incentive to continue working past your government declared ‘use by’ date.

For a great many it is the attraction of cashing in the Superfund and whilst this article isn’t about financial advice there are aspects we can touch on if you are considering retirement.

The single most important questions is: “Can I retire?”

The short answer is that you need to be in a position where you have your ducks lined up. No personal debts (credit cards, personal loans etc) is essential, and either no mortgage on your home or very little. Additionally you need to have an income stream, whether thats from investments or government pension, and lastly - you need a budget. If you can look at this picture - and my advice is to always pay an advisor to help you structure this - then the answer is; ‘of course you can.’

I am a big believer in retirement on your own terms. Leaving the daily grind behind for a life on your own terms is one of the most important decisions you’ll make, and could extend your lifespan by many many years.

In my experience, there are often significant life changes every 5-7 years or so (and yes it’s cyclic and no I don’t know why), changes such as moving house, buying an investment property, having kids or the kids going to school or leaving school. All of these impact our lifestyles. It’s no different in retirement - once you’ve made the decision to effect that change, you will still have those changes which should be allowed for. As an example, you retire at age 65 and your first 5 years is helping with grandkids - then 5-7 years later, there’s no longer that need, so you look to do some travel and before you blink - you’re 80.

Another key point is at what time in life do most people start actually thinking about retirement? My experience is those in their 50’s because it’s actually tangible. Sure, the younger generation are socking money into Super but very very few even consider what they can or should do with it. Yes, it’s convenient to let the fund managers look after it, but that carries many risks because of poor performance due to a variety of reasons including laziness.

There are strong reasons to manage your own money, and simple and effective structures to invest in shares earlier and then diversify in to property (or both) creating long term wealth outside of your day to day activities.

Along the journey of our lives we collect myths and misconceptions like butterflies.

Much of that is around debt, retirement from full time work and beyond. If we go back just 30 years ago, the average life expectancy (for men) was just 74 years of age and in 1960 it was just 68 Years. The treadmill was working until age 65, retire, and maybe you might get a decade of retirement but the stats said otherwise. Equally, investment in property and stock markets was rare, and Super was only invented in the late 80’s - so we are in uncharted waters now.

Just an aside, I’m running the figures for men because statistically they dont live as long as women (refer cartoon below)

The average life expectancy for Men is well into the 80’s and increasing year on year. If you look after yourself and avoid the major causes of death, you should expect to live well into your 90’s or perhaps even crack the ton.

I watched my Grandfather, born in the early 1900’s having worked his whole life, retire at 65. I distinctly recall him saying he’d only budgeted to live until he was 80. He died at 94.

So that raises a tough question. If you retire at age 67, how do you plan to live in to your 90’s? Not just financially, but mentally and physically. How do you stay fit and well? How do you stay useful?

Lets see if we can deconstruct retirement and see what it CAN look like.

Firstly - if your work is something you enjoy, and you can continue for as long as you want then resist the urge to retire. One of the major precursors to early death is simply not having enough to do. Equally if you’re in a job thats sucks, then re work your strategy with some super funds, and change your work. Do something you always wanted to but never had the opportunity because of employment location or conditions. Take a year or two off or pull back to a day a week whatever it takes for you to love life.

Secondly, there is no rule that says you need to pay the mortgage off, if you are continuing work, or anything that produces enough income to adequately service a loan then paying it out when you hit retirement age is not mandatory. And speaking of loans, if you plan to take mortgages (either on your home or investments) past your ‘use by date’ then do so in your 50’s or early 60’s. Banks have become quite risk averse since the Royal Commission and shy away from people approaching retirement age - even though you aren’t allowed to discriminate based on someones age. Hmmm… I smell an oxymoron, but lets not let trivial things like peoples lives stand in the way of a bank making money!

The sort of debt you want to have paid out is what I call retail debt - Credit Cards, Personal Loans, Car Loans - basically anything that isn’t a mortgage debt. Holding a mortgage past your retirement age, which you can continue to service easily - isn’t illegal, and there’s some sneaky ways to shift debt around if you have an investment property or two.

If your idea of retirement is to access some of your Super and pay off the mortgage, consider putting it into offset, and reset the loan as Interest Only for 5 Years. Fully offset you pay nothing, and you can’t be taxed on the interest savings (as opposed to interest earned on investments). By doing this you retain a large pool of funds which you can access at any time for any reason. If you subsequently use it for investment, then the interest becomes deductible debt. If you don’t use it, you’ve lost nothing by having it there.

If you’d rather buy an RV and do a couple of laps of Australia whilst doing a day a week ‘remotely’ then make that happen too!

I believe the myth of debt freedom at retirement stems from our life expectancies in the early to mid 20th century, and equally I think it should be re examined with fresh eyes and fresh attitudes. Rather than accept the dogma of the past, consider your talents and abilities and what you want as a lifestyle.

Retirement isn’t a set date in your life, nor is it a stylised lifestyle. Only you can create the circumstances around what that means, and I actively encourage you to get a clear picture of what you want and the terms of your ‘retirement’ no matter how far in the future that seems or how close it actually is.

“There is a tide in the affairs of men
Which, taken at the flood, leads on to fortune”

Such is the wisdom of William Shakespeare.

Written by Andy Thomson