Questions to ask yourself when you are considering retirement

When is the best time to retire?

It's a question I'm being asked more and more.

But of course there is no simple answer - it depends so much on individual circumstances. Just remember the old saying: a happy life needs someone to love, something to do, and something to look forward to.

That remains true in retirement.

For starters, the whole idea of retirement is perplexing to many. What are you retiring from? From a job, or from life?

Most people are hoping for a time when they are free of many day-to-day stressors: no more job tensions, no more commuting, school fees are over, and the mortgage is paid off.

So for many, the first aspect is the financial one.

If possible, you should retire debt-free, and with enough money invested to see you through the rest of your time on earth in good shape.

From age 50, achieving this should be a major focus, and I have written extensively about how compounding turbocharges your superannuation if you can work for a few more years.

The major practical issue is usually where you are going to live. Many people find the family home too big and expensive to run.

Downsizing is often an appropriate strategy - a smaller house suits those who want a garden; an apartment is great for people who want to be able to lock up and go travelling; an over-50s retirement village can provide a great social network, and arrange activities for everybody.

Then there is the personal aspect.

Two common challenges for retirees are boredom and loneliness.

This is why people who prepare for retirement normally fare better than those who are employed one day, and finished with work for good the next.

I recently read about an exercise recommended for planning your retirement.

Apportion 16 hours a day for sleeping, recreation and the chores of daily living, and you are still left with eight hours to do with what you like.

Take some time to consider how you would use those eight hours a day if there was no job to go to.

Four factors seem to have the greatest influence on how happy and healthy you will be when you retire: exercise, diet, social network and sense of purpose.

One of the advantages of having more time is that it's easier to develop new exercise routines and to reconsider what you eat.

As you get older, however, it's generally more difficult to establish a new social network.

Hobbies, sport, travel and volunteering are all good ways to boost your social life, particularly if yours used to be based around work.

And remember, if you're thinking of moving from your present home to a distant location, your social network will suffer.

That's why it's a good idea to rent for six months in a new area to test it out, rather than buying straight in.

There's a group of people who are very happy in their work, to whom retirement is anathema. If you're one of those lucky few, just enjoy it.

Good work provides the sense of purpose that many people find is missing from their lives in retirement, and helps you stay relevant.

At the same time, look at developing interests outside work, because at some stage you're going to want to slow down.

So, when should you retire? I don't know.

But if you consider these issues, I'm sure you will be able to figure out a good answer for you.

My wife and I are in their late 60s, have investment assets of $1.8 million, and are contemplating to transfer $1 million into a newly established family trust and use $500,000 to purchase a lifetime annuity. This would entitle us to receive a part aged pension. Do you think this would be a smart strategy and would a family trust with $1 million in investments be cost-effective?

Unfortunately, it's not that simple. Centrelink looks closely at any transfers to family trusts to ensure people can't do the strategy you are contemplating - in most cases they will still count the assets transferred to the family trust as your assets. You are way above the limit to receive the age pension, but would probably be eligible for the Commonwealth Seniors Health card.

I have an offset account against my home loan. This offset account balance is over $115,000 - my home loan account debt $80,000. My bank is still debiting my personal account. Why would this be? I thought that with an offset account you are only charged for the difference between the amount owing and the amount in your offset account.

When you take out a loan, you are required to make the required monthly payments - an offset account is just a useful device that lets you use surplus funds to reduce the interest payable and so reduce the loan faster. I see no point in having the offset account with the balance higher than the loan. All you are doing is wasting the earnings you could be making on the excess funds.

I wish to give my three children aged 60, 62 and 65 as you say "with a warm heart instead of a cold heart", a substantial amount of money. I consider them not to be the best money managers and thus am trying to decide what would be the best way to do this so that they could make efficient use of the money so that it lasts for some time. I was thinking to open super funds and use the bring forward rule. They have super funds but with small balances. I would appreciate your thoughts.

I think contributing the money for their superannuation funds as non-concessional contributions would be a good idea - if you wish you could contribute up to $110,000 each now and up to a further $360,000 each after 30 June as the limit on contributions will have increased then. They have all reached at preservation age which means they will be able to access the money when they wish, but it's a perfect chance for you to get involved and discuss the best funds to use and the best asset classes they should choose.