The role of a financial adviser is not to tell you what to do, it is to confirm the consequences of your decisions.

According to Wikipedia, the word decision comes from the Latin term decidere, which means “to cut off.” When you make a decision, you should be sacrificing something in one area to reinvest it in another area with a higher priority.

At Advice SA, we believe there are three factors you need to consider when planning for retirement.

  1. Annual Income
  2. Accumulated Wealth
  3. Retirement Age: whether it is planned, unplanned (poor health, redundancy etc.) or determined by your Age Pension age.

Everyone has a retirement goal that is important to them.

The consequence of deciding to prioritise one of the factors is that the other two factors may need to be variable. This is illustrated in the following ‘Retirement Decision Triangle’.

Retirement Decision Triangle’

Once you decide the factor most important to you, a financial adviser can then calculate the variable for the other factors – this becomes your Retirement Goal.

With this knowledge, you can then decide if the variables are within an amount that is acceptable.

Examples of comments made by clients include:

  • “I have completed my budget and I need to receive an annual income of ‘X’ in retirement.”
  • “I am sick and tired of work and I can’t see myself working for more than ‘X’ years.”
  • “The government is forcing me to work until my Age Pension age.”

As illustrated, if you require a fixed amount of annual income you will need to budget while earning an income to accumulate sufficient wealth. If you don’t have sufficient wealth, you will need to work longer to save it.

Conversely, if you are fixed on retiring on a certain date, you will limit the amount of wealth you can accumulate (as you will no longer be saving but drawing on your wealth). Limiting the amount of wealth you have accumulated means you need to receive less income from your wealth to ensure that you maintain it throughout your retirement.

For more information watch our video.

At Advice SA we provide goal-based advice through discovery meetings that allow you to uncover your ‘blue sky’ dreams. Call us to find out what’s possible for you.

Mark Bastiaans is an Authorised Representative #296627 of Guideway Financial Services Pty Ltd ABN 46 156 498 538 AFSL 420367.

The information provided above contains general advice that does not take into account your financial situation, specific needs or objectives and is not intended to be personal financial advice and should not be relied upon without written advice from Guideway Financial Services Pty Ltd.