Retirement is often only considered once people reach their 50’s, however it is always better to start planning forretirement much earlier than this.
Putting strategies in place earlier means you will have a better chance of meeting your retirement goals.
Here are a few things to consider when thinking about your retirement:
- What type of retirement would you like?
- How will you fund your chosen retirement lifestyle?
- How much money will you need to retire comfortably?
- What age will you retire?
- Will you work in retirement?
- What type of retirement income stream will you use?
Retirement planning involves a number of decisions and strategies to help ensure your twilight years are as comfortable and financially stable as possible.
Doing your research online, or discussing your options with your spouse and family are good starting points; however talking to a financial planner can help create a stronger foundation for you to save more money for retirement.
The two first things you should consider include:
- How much you’ll need in retirement, and
- Your retirement age.
Both of these points are interlinked, as the age that you decide to (or can) retire will contribute to how much retirement savings you will need.
Calculate how much you’ll need in retirement
Calculating how much you will need in retirement depends on the type of retirement you would like. Would you like to go on the occasional overseas holiday, or would you be happy with a modest retirement?
The table below is an indication of how much you may need to save for retirement.
|Modest lifestyle||Comfortable lifestyle|
Source: ASFA Yearly Retirement Standards March quarter 2011
Apart from your daily living costs, you may also like to factor in:
- Increasing future medical costs,
- Whether nursing home or assisted living may be needed later in your retirement, or
- Additional costs if you do not own your own home.
The best way to calculate how much you’ll need in retirement is to speak to an insurance specialist who can also project how much your superannuation savings will last.
Your retirement age is a personal decision; however having said that you must reach a certain age before you can access your retirement savings.
The age that you can access your retirement or superannuation savings is called your ‘preservation age’. Many Australians use the preservation age as a guideline for their retirement age; however the amount of savings you have, and the lifestyle you want post-retirement may also affect this.
The table below shows Australian preservation ages based on when you were born.
|Before 1 July 1960||55|
|1 July 1960 – 30 June 1961||56|
|1 July 1961 – 30 June 1962||57|
|1 July 1962 – 30 June 1963||58|
|1 July 1963 – 30 June 1964||59|
|From 1 July 1964||60|
Source: ATO 2011
Working in retirement
With life expectancy in Australia slowly increasing, more and more people are choosing to work part of their retirement years.
People may also choose to work during retirement for the extra cash, to keep themselves busy, or purely because of the social aspect.
Whatever the reason may be, a Transition to Retirement strategy allows people over 55 to receive a regular income stream whilst simultaneously boosting their superannuation savings by taking advantage of different tax rates.
Retirement income streams
How you access your super savings when you retire is an important decision.
There are many income stream products on the market which will allow you to do this, however the 3 main types of income streams (or account based pensions) include:
- Allocated – gives you access to your money at any time.
- Fixed-term – provides you with income for a specified term.
- Lifetime – provides you with income for the rest of your life.
Due to the complexities of income streams it is highly recommended that you speak to an insurance specialist to determine which option is best for you.