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10 Reasons to Include an Estate Plan in Your Retirement Planning


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Retirement planning involves identifying your retirement goals, the amount of time you have to achieve them, and the best methods for raising the money to fund them. It’s also about protecting your assets and ensuring they go to the right beneficiaries when you die.

This guide looks at the factors involved in developing an effective retirement plan and 10 reasons why it’s important to include an estate plan in your retirement strategy.  

Retirement planning

In today’s uncertain economic climate, funding a comfortable retirement is becoming a struggle for many people. In fact, according to the Australian Seniors Series: Ageing in the Workforce 2021, 50% of the retirees surveyed are considering re-entering the workforce for financial reasons.

Many don’t have enough savings or have underestimated the amount of money they would need in retirement, which is why it’s vitally important to have an effective retirement plan in place long before leaving work.

Effective retirement planning takes the following factors into consideration;

  • The amount of time you have – the number of years until you plan to retire (the longer you have, the more risk your investment portfolio can tolerate). As a rule of thumb, if you have ten years or more until retirement, you may be able to risk investing more in the stock market. While if you are close to retirement, you might be better off having more of your money in bonds and other low-return, low-risk investments.
  • The amount of money you will need – everyone is living longer these days, so more money is needed to fund a longer retirement. Estimating your likely post-retirement expenses will determine the size of the nest egg you will need. Aiming for a retirement income of at least 80% of your pre-retirement income will allow for the cost of living rises and unplanned expenses such as unforeseen medical bills, holidays and bucket list items.
  • The amount of tax you will pay knowing what your tax status will be in retirement is important if you want to estimate your income accurately. All your calculations should be made on an after-tax basis and your retirement planning strategy should be focused on reducing the amount of tax you will pay on your various income streams.
  • The amount of risk you can afford – one of the most important steps in retirement planning is successfully balancing risk aversion with return expectations. The best way to achieve this is by creating a flexible portfolio that can be regularly updated to deal with changing market conditions and retirement objectives. Be sure to consult a professional financial planner or tax advisor to determine the right strategy for your circumstances.
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Estate planning

Estate planning is often overlooked in retirement planning strategies. Many Australians don’t even have a will, let alone an estate plan. But if you want the right beneficiaries to receive your assets when you die, you need to have one in place.

Simply put, estate planning involves developing strategies for how your assets will be managed. These include who gets what if you die and who has the power of attorney if you are incapacitated and unable to make decisions for yourself.

It’s an important document that everyone should create and it’s not just for the wealthy. Your estate is the assets you own or control, which can consist of a large property and investment portfolio or just your house and car.

However large or small your assets, they belong to you and an estate plan will ensure they go to those you want to have them, rather than having them tied up in red tape for years.

10 benefits of estate planning

Estate planning needs to be part of your retirement plan and here are 10 good reasons why;

1. An estate plan is easy to create – if you’re in the process of planning your retirement anyway, including an estate plan is easy. You already have all the facts and figures to hand (i.e. income, assets, investments etc), so you can use them to complete your estate plan at the same time.

2. An estate plan provides clear guidance – at a time when your loved ones are mourning your death and are incapable of making sound financial decisions, an estate plan will prevent confusion and frustration by providing clear instructions on how your wishes are to be carried out.

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3. An estate plan will protect your legacy – if you and your spouse both die, the probate court will appoint a legal guardian for your children. Having an estate plan will allow you to nominate your own guardian such as another family member, who can care for your children and manage their access to their inheritance until they are of legal age.

4. An estate plan will give you peace of mind – an estate plan will provide you and your loved ones with peace of mind, knowing that when you pass away your assets will be distributed among your beneficiaries in the most simple, fair, and effective manner.

5. An estate plan will prevent conservatorship – if you become incapacitated and you don’t have an estate plan that names power of attorney, your loved ones will be subjected to an expensive and time-consuming court process to administer a conservatorship on your behalf. 

6. An estate plan will prevent family disputes – it’s a well-known fact that money changes people. So even if a family appears to get along well on the surface, mismanaged asset distribution due to not having an estate plan can often lead to family squabbles and even severing of familial ties in some cases.

7. An estate plan will help protect your assets – having an estate plan that stipulates where and how your assets are to be distributed can protect your family’s inheritance from misuse by a beneficiary and from unforeseen creditors in the event of a future lawsuit.  

8. An estate plan can help you organise your finances – preparing an estate plan can give you a better understanding of how to achieve your retirement goals. Undertaking such a close examination of your finances may give you more ideas on how to maximize your investment returns.

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9. An estate plan can help protect your business – if you own a business, having an estate plan can help to ensure it won’t be impacted by your death. During the estate planning process, you can set up a plan to ensure the continuation of your business in your absence, both for when you retire and after you pass away.

10. An estate plan can help protect your privacy – if you don’t have an estate plan, your estate will be subject to a long-drawn-out probate process, which becomes a matter of public record. If you don’t want everyone knowing your family’s business, an estate plan can help to keep it private.

Estate planning is a surprisingly easy task to accomplish and is something everyone should do when planning for retirement. It offers peace of mind for your loved ones, providing clear instructions on the distribution of your assets and peace of mind for you, knowing your family will be protected.

So if you don’t want to have to rejoin the workforce in a few years because you’ve realized you can’t afford to retire, start planning for your retirement now and be sure to also include a plan for what happens after you’re gone.


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