Finesse your finances for retirement
HAVE A FINANCIAL PLAN IN PLACE TO MAKE SURE YOUR MONEY WORKS FOR YOU WHEN YOU EMBARK ON YOUR LONG-AWAITED RETIREMENT
RETIRING can be both an exciting and daunting prospect for many people.
Before you head off caravanning around Australia, or living out whatever vision has been in your mind for your entire working life, there are few things you need to consider to secure financial freedom.
Muirfield Financial Services financial planner Matthew Torney says Australians are living longer, which means for most people, retirement spans about 30 years.
It’s important to know how much funds you will need, but Mr Torney says the suggestion that retirees need in excess of $1.5 million to live comfortably is simply not true.
“We encourage people to own the outcome and not get swept up in thinking they need an exorbitant amount to make it work,” he said.
He recommends asking a financial planner how to best leverage your superannuation before and after retirement.
Under current legislation, when superannuation enters the drawdown pension phase, both your earnings within the fund and withdrawals from the fund are entirely tax-free.
“Retirement is funded through the government via the aged pension or through your own superannuation or investment assets,” Mr Torney said.
“Realistically most of the retirement strategies ramp up in your 50s because anecdotally at that point in time the kids have left home and you’ve worked hard to get on top of a lot of your debt, if not all of it, and you might have 10 years of work left so you can boost your super in the lead up to retirement.”
Retirees will also need a thorough understanding of the Centrelink benefits they are entitled to, such as a pension or low-income health care card. A financial planner can assist in working through the sometimes complicated process.
The team at Muirfield also recommend planning for spending on expensive assets that will likely need to be replaced during your retirement, like cars, fridges, televisions or a new roof.
Mr Torney said the answer to the ever-popular question ‘how much do I need to retire?’ depends on whether you are planning on a modest or comfortable retirement.
The Association of
Superannuation Funds of Australia (ASFA) includes two categories for retirement, a modest retirement lifestyle — including necessary leisure activities as well as most living, medical and transport costs — or a comfortable retirement lifestyle suitable for those seeking to enjoy a broad range of leisure and recreational activities, including occasional international travel.
A couple aged around 65 that owns their home will need $40,380 a year for a modest retirement or $61,909 for a comfortable retirement, based on ASFA June quarter data.
This decreases to $38,225 and $58,477 for a couple aged around 85.