An introduction to Retirement Planning: The 4 L's

April 30, 2021

The thought of retirement can leave most people with a remarkable range of emotions. For many, it proposes a terrific milestone of life that frees up time to pursue opportunities for leisure, travel and more time with family. For others, it poses an ominous end of reliable income and stability, leaving anxiety about the unknown both personally and financially. Regardless of how it makes you feel, adding in robust retirement planning is a simple solution to ensure a more successful outcome.

Australians find themselves in a lucky cohort compared to many countries, with one of the most reliable retirement savings mechanisms, superannuation, entrenched in daily life and legislation. For most, it serves as a dutiful savings servant in the back of our busy lives. It often only becomes rightfully critical as our attention moves from the present (working) to the future (retirement).

Thankfully, help is at hand. Much of the financial advice industry is suited to helping everyday Australian’s uncover, confirm and help realise their retirement ambitions and goals and have the tools to incorporate investment predictions, tax implications and government entitlements.

Calculations and forecasts can be a fantastic tool but only have relevance when applied using the inputs that have meaning to you. Considering these inputs, both before and during interactions with an adviser, give the outcome the highest probability of success. Success can take on several forms. Be it confidence and reassurance that your life is on the right track, that you will have enough in retirement or that your loved ones will be taken care of according to your wishes.

The Four L’s to consider in Retirement Planning.

For an adviser to fully understand and execute a meaningful plan for you, it is crucial that you have considered and can respond to the four critical areas of post-work-life below. Suppose you can confidently answer questions that focus on these areas. In that case, chances of you reaching success in the outcomes of financial advice brighten tremendously.

Longevity: Longevity objectives are directly related to the main risk of retirement income: outliving your money. The goal here is to centre on financial independence and knowing that you can pay your basic expenses and not be a burden to others. These include but are not limited to daily living expenses, housing, and healthcare.

Lifestyle: Lifestyle objectives focus on maintaining your desired standard of living and enjoying your retirement with more discretionary spending. Unless you are very wealthy, these goals usually necessitate increasing your spending power. This retirement planning aspect is an interesting one, as there is often a trade off between lifestyle before and after retirement. However, having a plan for retirement means you can choose the trade off between “now” and the “then” that you want, as opposed to having it dictated to you. A big part of lifestyle also includes spending on loved ones without impeding your retirement success. Typical Lifestyle goals include travel and leisure, self-improvement, and social engagement.

Liquidity: Liquidity objectives involve maintaining enough reserves for unexpected contingencies. Maintaining enough liquidity is especially important for dealing with family emergencies, home repairs, and random death or illness. Liquidity can also be a resource to fill in gaps when there is an unpredictable market downturn.

Legacy: Legacy objectives are about leaving assets for subsequent generations or to charities and contributing to impactful activities with your time and talent. Typical goals include philanthropy, political movements, and supporting loved ones.

Let’s get the ball rolling

As a simple exercise to get you started, it’s time to dream. What’s the point of working all those years without some goals to achieve afterwards?

Put the kettle on, book some time with your partner and start a list of key desires and experiences that you would like to achieve post retirement. Think big, it might be a destination holiday, a new car/boat/caravan, upgrades to your home or helping your children out with purchasing their own home. The sky is the limit, and the chances of success are dramatically improved if you put them down on a list now.

Hopefully, in the end, you have a sizable list of goals and objectives that are important to you and if you have one, your partner as well. If you do not have more than 5 items of interest on that list, go back and think harder. If you are stuck, perhaps sleep on it, but make it a goal to have 5 or more items on the list before continuing.

Once you have settled on your present goal list (keeping in mind that this list will potentially change over time), it is now time to prioritise them. This is the hard part, as some items may be enduring (such as ‘take an overseas holiday every year’) and others will be lumpy (‘help with a house deposit for my child’). Try to give the items timeframes and dates as this is a crucial component of projecting and encompassing the financial resources required to make these dreams a reality (and rationalise the likelihood of them happening).

Just because something is at the bottom of the list does not necessarily mean it may not happen, but will help ensure that your higher priority goals are met first, and give you confidence in staying the course of the plan. The idea is you can put this list somewhere important and visible (fridge/pantry door works well) and refer and reflect on it. If you decide to seek professional help, this list serves as the ‘bedrock’ for an adviser to use in the financial planning process.

So what are you waiting for? Make a start on your list and throughout the following few articles, I will dive further into each of the four ‘L’s to consider when planning your retirement and give you some practical scenarios and examples to help you take more control, and raise the prospect of success in your retirement planning.



Tim Fuller is Head of Advice at the Macrobusiness Fund, which is powered by Nucleus Wealth.

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Tim Fuller is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Nucleus Advice Pty Ltd – AFSL 515796.

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