If you’re a soon-to-be retiree, you can be forgiven for thinking you’ve been a little hard done by with regards to retirement planning schemes. Rest assured there’s still time to ensure a comfortable retirement.
The average Gen X and Y worker will have almost 50 years worth of superannuation contributions to fund their retirement.
Those about to enter retirement in the next decade, however, have likely only had about 30 years to properly prepare, as compulsory superannuation payments were only introduced in 1991.
Combine this with rising living costs and an ever-increasing life expectancy and retirement can seem daunting. Not the relaxing happily-ever-after it’s made out to be.
However, by considering the following four tips you can shift your retirement outlook from simply getting by, to living comfortably.
1. Figure out when you want, and can afford, to stop working
Having an end date is important as it gives you a deadline to get your finances in order.
Because, unless you own assets like property or shares that provide a passive income, you may not earn another single dollar during your retirement.
That means you’re going to need to plan for about 25 years worth of retirement, just to play it safe.
That said, you might be in the fortunate position of actually enjoying your work or the company of your colleagues. If that’s the case, then there’s no reason you have to retire once you hit that magic 66 (or 67) number.
For example, working an extra four years can be the difference between living off $35,000 a year until you’re 90, and living off $41,000 (assuming you earn $70,000 a year, have $300,000 in your super fund, and make the maximum salary sacrifice contributions).*
2. Salary sacrifice
As hinted at above, salary sacrificing into your super fund can make a big difference towards your quality of life in your golden years. Even if you only do so for your final decade of employment.
Let’s say you’re 57-years-old, wanting to retire when you’re 67, earning $70,000 a year, and have $150,000 in your super fund.
If you don’t salary sacrifice during your final ten years, you’ll need to live off about $33,000 each year between 67 and 90.
If you salary sacrifice the maximum amount you’re allowed (26.21% in this scenario), then you’ll live off $37,000.
Now, add a partner under the exact same scenario. That’s the difference between $53,000 a year and $60,000 a year as a couple.
That’s enough to allow you to live in a nicer apartment, or splash out on a restaurant meal a couple of times a week, or go on two extra holidays a year.
3. How much will the age pension boost your super fund?
Rest assured that if you’re worried that your super balance and assets portfolio is looking a little on the thin side, the age pension is there to lean on.
ASIC has provided this easy-to-use calculator that can help you figure out how much the age pension may add to your superannuation payments.
Here’s a quick example. A 65-year-old looking to retire next year with a superannuation balance of $150,000 could expect to receive an annual age pension of $23,600 on top of their annual super payments.
A person with $600,000 in their superannuation fund on the other hand won’t start receiving any age pension benefits until they’re age 71 ($2,831, which steadily rises to the $22,000/$23,000 mark when they’re 81).
4. Can you downsize?
Downsizing to a granny flat or a modern unit can be a handy way of delivering a nice cash injection into the retirement kitty.
Not only that, but selling a large property means less maintenance, and possibly less costs.
Sure, your family home may hold sentimental value, but retirement is all about creating new memories and adventures.
Final word
Retirement can be a daunting prospect. And with so much at stake it pays to get your retirement planning strategy right.
If you’d like advice tailored to your individual retirement needs then give us a call. We’d love to help you ensure you enjoy your golden years.
* All figures quoted in this article have been calculated using the federal government’s Retirement Planner calculator. They do not take into account a person’s individual circumstances and potential assets, such as property, shares, etc.
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