Flexible income streams
YOUR RETIREMENT INCOME STREAM SHOULD BE FLEXIBLE, SO YOU AREN’T BLINDSIDED BY SURPRISE COSTS WHEN YOU’VE STOPPED WORKING. QSUPER WRITES
It can be tricky to estimate your future living costs. Heading into retirement, your lifestyle and behaviours may change, impacting your expenses. Without the need to drive to work, you could make savings on car payments, insurance, maintenance, and fuel costs. If your mortgage is paid off, you may also assume you will have minimal housing costs. But as homes age they tend to require additional maintenance and repairs. Then there’s rising council rates, and your power and other utilities bills may just go up because you may spend more time at home. Even for the best prepared, life still has a way of throwing in a few surprises.
How much will I need?
Fortunately, the Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard has done the heavy lifting on calculating retirement living costs. Based on September 2019 quarterly figures, ASFA calculates that to have a ‘comfortable’ retirement, single people aged 65 will need $545,000 in retirement savings, and couples will need $640,000. That means an annual budget of $43,787 for singles and $61,786 a year for couples to cover the bills. But you may still need extra flexibility when life deals you something unexpected. When you have stopped working, you may get this confidence when your superannuation income stream allows you to control how much and how often you are paid, and allows you to withdraw extra money at any time. This kind of account, such as QSuper’s award-winning Retirement Income account, also means your savings can continue to grow giving you the benefits of tax-free investment earnings and no tax on payments or withdrawals after you turn 60.
Uncover the surprises
Here are three costs to retirement that even the best planners may not be prepared for:
1. Above-inflation price increases
In retirement, increases in the price of many necessities can prove significant. Drought, bushfires, or other natural events may cause the prices of some foods to skyrocket. Power prices, petrol prices and private health insurance costs may continue to climb.
2. Boomerang kids
Between studying longer, delaying marriage, or just struggling to find their way into the housing market, more young people are choosing to stay at home and live with their parents in their early adulthood. Even if it’s not kids staying at home, you may well be called on to help financially for the kids’ life events like weddings, the birth of children, divorces or health issues.
3. Unforeseen medical expenses
While Australians have high life expectancy, they also have among the highest number of years spent in ill-health compared with other OECD countries. So, while you may retire in great physical shape, one of the most important financial needs in retirement can become medical costs and aged care – all of which reinforces the merits of using a trusted, well-performing Retirement Income account. At QSuper, the retirement income product – winner of Money’s 2020 Best Balanced Pension Product – was designed to ensure that even though you may have stopped working, your account has not. Your money remains invested and your savings continue to grow, all the while providing an income stream to deal with life’s usual demands, and the surprises as well.