Retirement not just for millionaires
Anthony Keane ONEmillion dollars can be a scary number formanypeople, especially if you hear that’s howmuchyoumay need for a comfortable retirement.
ManyAustralians worry their nest egg is too small but most will be able to enjoy their golden years on muchless than they think, thanks to our generous tax and pension systems, financial strategist Theo Marinis says.
He says the commonly touted $1 million figure relates tohowmuch money is needed to generate about $50,000 of annual income, but this conclusion is too simplistic.
‘‘For a traditional Australian couple on average annual income of $65,000 and $200,000 in superannuation, the actual takehome income from the combination of age pension and super will be very similar to what they were earning when working full time,’’ Marinis says.
‘‘Even if your retirement savings are minimal or even non-existent, you can still live better than most retirees around the world.
‘‘Don’t think that you need $1 million to retire. If you want $28,000 a year you don’t need anything because that’s what the pension is (for a couple).’’
All of that age pension income Australians Tax Offset.
Anywithdrawals from super for retirees aged over 60 are also taxfree.
Goldsborough Financial Services director and adviser Glenn Todman says paying tax is non-existent for the vast majority of retirees today.
‘‘Each member of a couple can earn $26,000 before they pay any tax,’’ he says.
The starting point for anyone looking to retirement is to crunch some numbers.
‘‘Work out what you need to live on. Some people need $35,000 to $40,000 and some people need $60,000 or more,’’ Todman says.
He says people typically spend more money during the early years of retirement and muchless later.
‘‘It’s no use getting to 80 or 90, having a big bucket of money, and thinking ‘I wish I’d gone on that trip’,’’ he says.
Marinis says the Government could make retirement a lot easier by relaxing the caps on super.
‘‘The current concessional contribution cap of $50,000 per annumfor people over the age of 50 falls to $25,000 perannumafter June 30, 2012. This is ridiculously low,’’ he says. ‘‘It deprives Australians of a vital opportunity to boost their superannuation savings in their peak earning years.’’
LOOKING AHEAD: It can be daunting to work out how much is needed for a comfortable retirement.