Dream­ing of re­tire­ment

LifeStyle Wimmera - - INSIDE -

We all have a vi­sion of our per­fect re­tire­ment. But whether it’s trav­el­ling around the coun­try in a lux­u­ri­ous mo­tor home, play­ing golf ev­ery day or spend­ing more time with the grand­kids, how do you ac­cu­mu­late enough money to pay for your golden years?

How much do I need?

Life­style is a per­sonal choice. The big ques­tion is: How much do you need to save while you’re work­ing to pay for your pre­ferred re­tire­ment life­style?

A good place to start is to cal­cu­late how much you need to meet ba­sic liv­ing costs. You could use your cur­rent ex­penses as a guide, but keep in mind that these might be quite dif­fer­ent dur­ing re­tire­ment.

What about the age pen­sion?

The age pen­sion is de­signed as a safety net for peo­ple who can’t self-fund their re­tire­ment.

The pay­ment for a sin­gle per­son rep­re­sents less than 30 per­cent of av­er­age male weekly earn­ings. A per­son re­ceiv­ing the base max­i­mum sin­gle-rate age pen­sion will re­ceive $873.90 each fort­night, or $22,721 an­nu­ally, while a cou­ple en­ti­tled to the full rate will re­ceive a com­bined amount of $1317.40 each fort­night, or $34,252.40 an­nu­ally.

This might be enough to cover ba­sic es­sen­tial ex­penses, but most re­tirees want a bet­ter stan­dard of liv­ing and are more ac­tive in re­tire­ment than pre­vi­ous gen­er­a­tions.

For these peo­ple, the age pen­sion won’t be enough. Take this for ex­am­ple.

Liv­ing a mod­est life­style

The As­so­ci­a­tion of Su­per­an­nu­a­tion Funds of Aus­tralia, ASFA, Re­tire­ment Stan­dard pro­vides an in­sight into the cost of dif­fer­ent life­style op­tions.

First pre­pared in 2004, it bench­marks on a quar­terly ba­sis the an­nual bud­get Aus­tralians need to fund ei­ther a ‘com­fort­able’ or a ‘mod­est’ stan­dard of liv­ing in re­tire­ment.

The stan­dard de­fines a mod­est re­tire­ment life­style as ‘bet­ter than the age pen­sion, but still only able to af­ford fairly ba­sic ac­tiv­i­ties’. The June 2016 ASFA fig­ures for those aged about 65 sug­gest that a sin­gle per­son would need $23,767 a year to achieve this, while cou­ples would need a com­bined in­come of $34,216.

Up­grad­ing to com­fort­able

The stan­dard de­fines a com­fort­able re­tire­ment as one that en­ables ‘…an older, healthy re­tiree to be in­volved in a broad range of leisure and recre­ational ac­tiv­i­ties and to have a good stan­dard of liv­ing through the pur­chase of such things as: house­hold goods, pri­vate health in­surance, a rea­son­able car, good clothes, a range of elec­tronic equip­ment, and do­mes­tic and oc­ca­sion­ally in­ter­na­tional hol­i­day travel’.

The June 2016 ASFA fig­ures sug­gest that a sin­gle per­son would need $43,062 a year to have a com­fort­able life­style, while cou­ples would need a com­bined amount of $59,160.

Ob­vi­ously these fig­ures are just a guide, and the ac­tual amount needed to fund your pre­ferred re­tire­ment life­style will de­pend on the choices you make.

How much is enough?

Look­ing at the fig­ures above, it’s clearly ap­par­ent that if you want more than a ba­sic life­style in re­tire­ment, you’ll need more than the age pen­sion. Your su­per­an­nu­a­tion and non-su­per­an­nu­a­tion sav­ings will need to sup­ple­ment the dif­fer­ence, and in some cases, fully fund your re­tire­ment.

The ASIC Moneys­mart Re­tire­ment Plan­ner cal­cu­la­tor, avail­able at www.moneys­mart.gov.au, is a use­ful tool.

The fig­ures gen­er­ated sug­gest that to achieve a mod­est re­tire­ment, as de­fined by the ASFA Re­tire­ment Stan­dard, a sin­gle per­son should save about $473,000, and a cou­ple should save about $681,000. These fig­ures don’t take into ac­count any pos­si­ble Cen­tre­link Age Pen­sion en­ti­tle­ments. To achieve a com­fort­able re­tire­ment, a sin­gle per­son should have about $857,000 and a cou­ple should have about $1,178,000.

These are generic cal­cu­la­tions based on a five per­cent re­turn on in­vest­ments.

What’s the best way to save?

Su­per­an­nu­a­tion is the most tax-ef­fec­tive way to save for re­tire­ment. You can build your su­per through em­ployer con­tri­bu­tions, in­clud­ing salary sac­ri­fice, your own con­tri­bu­tions, spouse con­tri­bu­tions and gov­ern­ment co-con­tri­bu­tions. There are cer­tain re­stric­tions on su­per­an­nu­a­tion con­tri­bu­tions and with­drawals, so you might need to sup­ple­ment your su­per­an­nu­a­tion with other in­vest­ments.

In con­clu­sion

Re­gard­less of how much you need, it’s im­por­tant to start plan­ning early. A fi­nan­cial ad­viser can work with you to de­velop strate­gies that suit your in­di­vid­ual cir­cum­stances and help you to look for­ward to en­joy­ing your re­tire­ment dream.

Note: Age pen­sion fig­ures quoted in­clude sup­ple­ments.

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