The simple fact is that retirement planning involves time and effort. What you do, and the strategies you adopt leading up to your retirement, could significantly impact the way you live in retirement. Professional advice may well be one of the most profitable investments you ever make!

Most of us expect to retire one day, yet few of us really think about how retirement will affect our financial security. This is surprising, considering we could spend a third of our lives as retirees.

Whether it’s still several years away or just around the corner, you should plan for your retirement now. Your lifestyle in retirement will be governed largely by your financial position. That’s why it’s so important to start planning for your financial security as soon as possible. The earlier you start planning, the more you’ll be able to grow your retirement ‘nest egg’.

Ideally, your retirement years shouldn’t be plagued with financial worries, yet many Australians fail to plan for their retirement. Don’t leave it to chance. With careful planning, your retirement could include some of the best years of your life.

The Age Pension is only a safety net and should not be relied on to provide you with an income in retirement. Furthermore, depending upon the level of your assets and income set aside for your retirement, you may only be eligible for a portion of the benefit, if at all. This means the majority of us should be actively saving for our retirement.

But it doesn’t stop at saving. Even with the legislative changes that occurred in September 2004, there are still ways of structuring your retirement investments so that you may achieve or increase pension entitlements. So it’s important that you consider all the strategies available and take advantage of opportunities that may help you maximise your retirement income.

Many self-employed people invest in their business with the expectation that the profits and goodwill thus generated will adequately provide for their retirement. Generally, super savings are protected from creditors on bankruptcy and enjoy concessional tax rates. A portion of profits should be salted away in super each year, so that in the event that the business does not achieve the sale price you had hoped, you have diversified your assets. This means that you’re not totally dependent upon a single investment source to provide your retirement income.

And remember, when you sell your business, capital gains tax can be reduced or eliminated through the small business retirement exemptions.

The 'right' time to retire is a very personal decision. It all depends upon how eager you are to retire and when you feel you can afford to do so. You may like to consider part-time or voluntary work.

This can help you adjust to a retirement lifestyle by giving structure and purpose to your time without the stresses associated with full time employment.

As a rule of thumb, you should aim to have at least 60 per cent of your annual pre-retirement salary as income for each year you are in retirement. However, the exact amount of money you'll need will largely depend upon what you hope to achieve in retirement. Extensive travel, for example, will make a big difference to your income requirements.

Calculate what your expenses are today, and what you're likely to need in retirement. This will enable you to estimate the level of retirement savings you'll need to accumulate.

The amount of money you receive will depend upon a number of variables, such as the industry in which you work and the number of years you’ve been employed. You may be eligible for a retirement payment from your employer, consisting of some or all of the following:

• a termination of employment payment if you are retrenched;

• outstanding salary or wages;

• any annual leave, long service leave or leave loading owed to you.

You may also be entitled to a payment from your superannuation fund/s. These payments will be paid as an Eligible Termination Payment, and are subject to concessional tax rates. Eligible Termination Payments can be rolled over, which means the funds can be transferred from one approved super/rollover fund to another. The benefit of rolling over is that the interest earned on this form of investment is generally taxed at a lower rate than your marginal tax rate. You can also defer the tax you would pay if you took the benefit in cash.

When you retire, you may qualify for the Age Pension. Even if you have substantial assets and intend funding your own retirement, you may be eligible for a part-pension.

You only have to qualify for $1 of pension a year to receive the Pensioner Concession Card which entitles you to discounts, among other things, on electricity, gas, telephone, rates and pharmaceutical items. The Commonwealth Seniors Health Card is also available to some people who are over Pension Age but do not qualify for an Age Pension depending upon income levels. It entitles cardholders to cheaper pharmaceuticals and other health benefits.

Purchasing an annuity or allocated pension is a common way of generating an income in retirement. Annuities and pensions can be paid either for a set period of time or for the rest of your life.

These investments can receive preferential social security treatment, and can help you access government pensions and other entitlements.

While examining how you’ll finance your retirement is essential, other issues also need to be considered including:

Lifestyle – what do you hope to do in retirement? How do your plans fit in with those of your partner?

Housing – where will you live? Will you remain in the family home or move to a smaller place, ‘granny’ flat or retirement village?

Health – what can you do today to ensure that your state of health allows you to enjoy retirement? A regular exercise routine and sensible eating are great starting points.