The last few years of your pre-retirement investing can make a very big difference to your long term retirement income. There are three things you can do:
1. Increase your investments including super contributions, especially as your income rises and obligations such as childrens’ education and mortgage repayments fall away.
2. Keep working a little longer; one, two or three extra years earnings will make a big difference.
3. Defer drawing your superannuation income for a while. You may be able to do this if you can get part time or consulting work after your “retirement”.
In the 70s there was a push to reduce the retirement age to 55, to create employment. More recently, governments have realised that people are living longer and longer and they cannot afford to pay early pensions. So they have started to push the pension age beyond 65.
At the same time, businesses have started to realise they cannot afford the skills loss of early retirement, and this is certainly an upside for people planning their retirement.
There is now emerging a new pattern of work, where people in their 60s start to wind back the number of hours they spend at work. They still work at a senior level, reflecting their skills and experience, but they may work part time, on demand, project based or in a consultancy role.
Typically people cut their hours to two or three days a week, but at rates that reduce their income by perhaps only 20% or 25%.
They might continue in this pattern into their 70s, before ceasing work altogether.
When they do retire fully, those few extra years will have made a really significant difference to their financial comfort in retirement.
