Australians are living longer and if you hang up your work boots at, say, age 65 and live to age 90, you need to plan for the possibility of a quarter of a century in retirement. That’s a wonderful thought! But will your money last the distance?
Understanding your current financial position
A good starting point is understanding your current financial position. That means adding up all your assets including your superannuation and then subtracting the total value of any debts you owe (your liabilities). The figure that’s left is your capital and this is what you could invest to support what will hopefully be a long and rewarding retirement.
Cost your dream – budgeting for living expenses in retirement
The next step to maintaining your retirement lifestyle is drafting a household budget. This will give you a firm idea of how much annual income you need to support your preferred lifestyle.
Bear in mind, as a senior you may be eligible for concessions and discounts on a range of regular expenses if you hold a Seniors Card or if you receive a full or part age pension.
Be mindful of your health
While your health may influence when you retire and your life expectancy, it can also have a major impact on your finances in retirement.
As you age, you may find medical bills comprise a growing part of your household expenses. This is definitely something to consider when planning your retirement living costs.
Sources of income in retirement
Returning to work for extra money
One option to give your retirement income a boost, is returning to work on a part-time or casual basis or even doing some consulting or interim work.
After years of growing your superannuation savings during your working years, retirement is the time when super really comes into its own.
You can access your super once you reach preservation age and retire, which is currently age 56, increasing to age 60 over the coming years. Otherwise you can access your super from age 65, even if you haven’t retired. It can be received tax free once you turn 60 but there are some great tax concessions between preservation age and 60.
Purchasing an income stream
Rather than take your super as a lump sum, you can also receive the money as a super income stream – often called an account based pension.
This means you receive a series of regular payments from your super fund and in this sense it can be just like receiving your regular wage or salary. This makes budgeting easier and you still enjoy the benefits of tax concessions that apply to superannuation, including tax free payments once you turn 60.
Planning for and managing the financial aspects of retirement can seem complicated and it is an area where good financial advice can make all the difference.
Speak to us for help deciding the sort of retirement you can comfortably afford, how to invest for your needs and the best way to put your superannuation savings to work.