How to retire in tough times
The GFC forced many people to delay retirement but Sue Hoban speaks to three who have bitten the bullet.
The GFC forced many people to delay retirement but Sue Hoban speaks to three who have bitten the bullet. The lingering effects of the global financial crisis and fears about the European debt crisis have taken some of the gloss off the retirement dream for many Australians. Instead of turning those dreams into reality, many older workers are putting off retirement and are grimly hanging on in the workforce.There are still enough taking the plunge each year to show that, within a range of financial situations, it's still possible to enjoy a satisfying retirement in the present economic climate.If you've decided 2012 is the year you would like to join them, you're probably wondering how you'll manage, both financially and with the big psychological adjustment of such a significant life change.Even with the most meticulous pre-retirement planning, it is still going to be a big step into the unknown. Will you be able to live comfortably enough when those figures on the page translate to your new income? Will your money last you for the 20, or even 30, years you might need it to support you? Will you enjoy the new freedom and opportunities or do you worry about how you are going to fill your time?You might be wondering how others have coped in a similar situation. To find out, we have talked to three retirees to get a view of the retirement experience from the other side.Restless retiree hankers for jobBRISBANE'S John Arthur retired at 65 but it was not a foregone conclusion and he does not necessarily recommend it for everyone."If you're enjoying your work and you've got your health, I really don't think 65 is the magical age," he says. "I think you set yourself milestones. When you're 45, you say, 'Oh, retirement looks good at 50' then when you get to 50, you say, 'Maybe 55."' At 60, he still did not feel ready.By the time he did sign off last July, he had spent 50 years working for a major corporation, much of it in senior executive positions."For me, it all came down to the fact that working for large corporations had changed a lot," he says. "I wasn't enjoying it as much and I had set myself up well enough financially to retire."John was not deterred by the global financial crisis after getting himself in a position in which he was confident he could withstand whatever might happen in the markets. "I have been fairly conservative in my fund and I made sure I was sufficiently diversified."He is comfortable with a return of 6 per cent to 7 per cent from a mix of asset classes dominated by cash and "very, very conservative" equities.He says he is at ease with his decision to retire but is still adjusting to the change. Even something like sitting around having coffee with friends can feel odd. "Eight months ago, that would have been a real time waster."His new routine includes golf, bowls, tennis and spending more time with his children and grandchildren. But this may not be enough to keep him occupied."You can only mow the lawn so many times a week and, as far as walking up and down the aisles of Coles with my wife goes, well, I have done that once and it's not for me, so I'm still deciding whether I might need to find something to do two days a week, even if it's working in a bottle shop or something."If he does, it will not be out of a need to boost his retirement income: "I'm fortunate to be coming out of a very good super plan that I have been involved in for 40 years."He says that for a decade before he retired, he changed his super to the maximum permissible level through salary sacrifice and putting all his bonuses directly into super. He now draws the minimum allowed in an allocated pension, supplemented by other investment earnings, giving him an income equivalent to about 75 per cent of his former salary.John says he would never have given up work until he was certain he and his wife, Robyn, could maintain their lifestyle, which includes keeping homes in Brisbane and the Gold Coast.His biggest tip for those considering retirement is to get professional advice. "There are intricacies within taxation and superannuation that most people don't have their heads around," he says. "You really need to go and find out where you stand. Sit down and do the exercise about what it costs you to live and how much you're going to need for the sort of lifestyle you want."Former nurse settles for lessBY THE time former mothercraft nurse Jane Bodnar retired last July, she had accumulated just $50,000 in superannuation after spending many years out of work raising her four children.But unlike many of her friends in better financial positions, she says she had no fears about whether she would cope."I just thought, 'I'll manage, I'll make this work for me,'" she says. "I'm not a scrooge but I have always been fairly thrifty."She now lives happily on the full age pension, supplemented by a small amount in allocated pension from her super and some assistance from her estranged husband.Jane says she saw a financial adviser and didn't hesitate over the decision to retire once she discovered she was able to qualify for the age pension at 64."I was getting very tired because nursing is shift work and I had just spent three years helping my mother before she died," she says. "Like it or not, our energy levels start to deplete after a certain age and I, personally, don't think it's worth working yourself to a frazzle."She acknowledges that she's better off than many age pensioners, not only because of the supplementary income she receives but also because she has been able to live in the family home and run a car she paid off before she finished work. "Without that, it would be very hard but I still think the way I operate, I would survive on it my mother did," she says.Jane says her philosophy is to be satisfied with what she has. "Nursing is not well paid," she says. "As a mothercraft nurse, I was only earning about $24 an hour, so I have never had a lot of money and we never had a lot of money growing up, so I've always been quite accepting of the fact that I would not be retiring on much."She says her life has been enriched by the absence of stress and the chance to spend more time with her children and grandchildren."I am very happy," she says. "My children all live away from Sydney and I was getting frustrated at not being able to see them as much as I wanted to. I have also been blessed with some wonderful friends and that is just a lovely distraction. I certainly don't sit at home twiddling my thumbs and getting out the knitting."So far, Jane has not had to make any sacrifices to stay within her means but that may come."I know I'm probably going to have to be frugal with food shopping and be mindful of things like the utilities bills and be more conscious that things aren't being wasted," she says. "But I still shout myself to the theatre and movies and I still go out for an inexpensive meal with friends."Proactive superannuant leaves nothing to chanceSHIRLEY WHITE had a clear vision of what her life in retirement might look like and when the time came, she made sure the reality matched it.She retired five years ago after spending 42 years with the charity House with No Steps the last 20 as chief executive determined to make the next phase of her life just as fulfilling."I came home one day and thought, 'Well, that's it. Goodbye to 40 years of work. Now you've got to make sure you fulfil your life and not let it slip by.' So I decided I was going to do all the things I didn't have the time and opportunity to do before and it's been wonderful," Shirley says.The transition from a job that often entailed 16-hour days was eased by the chance to spend more time with her two daughters (and now grandchildren) and to pursue her interest in the arts just as she planned.The adjustment for Shirley, who was widowed 25 years ago, was also made easier by the thorough way she prepared financially for the move, soaking up all the information she could about superannuation and investment.Because of a childhood injury and lingering disability, she believes she was fortunate to have been able to join a good superannuation scheme without a medical when she worked for a large publishing company in her early 20s. Her next employer used the same fund, so she was able to continue with it for the next 45 years."I always made sure I put more into my super than I had to because I knew that was what was going to get me through the rest of my life," she says. When she set her capital target, five years before she eventually retired, she increased the amount she salary sacrificed to about 12 per cent of her pay.She also sought professional advice. "I sat down with a financial adviser and mapped out a plan of what I thought I would need to be able to retire and live the lifestyle I wanted to live and do the travel I wanted to do," she says. "I met with him twice a year and we would go over my plan and how much money I was going to need and it looked as though it was going to work out fine for me."Shirley says the biggest impetus came when the federal government foreshadowed its move to make all withdrawals from superannuation tax-free for those over 60 from July 2007, which sealed her decision to retire at 65."That made a huge difference. I thought, 'OK, I can live on this now,' whereas before I thought there might need to be a pinch here and a pinch there," she says.She opted to take an income stream rather than a lump sum because she was happy with her super fund and the amount of input she was given into her investment options. Her pension fund is split between cash (35 per cent) and blue-chip, dividend-producing equities but that may vary depending on market developments.Shirley says she decided to reduce her allocated pension by $10,000 last year after finding she didn't need as much and her income now is about 65 per cent of her former salary.She has maintained a conscientious approach to her financial situation since retiring, becoming a proactive superannuant."I want my super to last me, I don't want to lose it in the markets as so many people I know have," she says. "I did drop a little bit but I have picked it up and I'm now back to where I was."Shirley carefully studies her monthly reports and meets twice a year with her fund adviser, often bouncing around ideas sparked by her research. She advises others to be similarly proactive. "I think you have to be. I don't think you can afford to take your eye off it," she says.