Thinking about retirement?
With retirement on the horizon, you may be asking yourself a number of questions, such as:
- How much can I spend in retirement?
- How long will my super last?
- What can I do to improve my retirement lifestyle?
- What mix of assets can help make my money last longer?
How much can I spend in retirement?
According to calculations from the Investment and Financial Services Association (IFSA), most Australians will need approximately 65% of their pre-retirement income to maintain their current lifestyle in retirement.
This means that if you're currently earning $70,000 a year, it's estimated that you'll need approximately $45,500 a year to maintain your current lifestyle in retirement.
How long will my super last?
If you're not sure how much you'll be able to spend in retirement, the first step is to work out how long your existing superannuation savings are likely to last. This is a combination of how much you want to spend in retirement, your life expectancy, and the cost and performance of your fund during your retirement.
If you're planning to retire at age 65, the research suggests that you're likely to live for another 20 years. The average Australian woman at age 65 has a life expectancy of about 86 years and the figure for Australian men is about 83 years*.
What can I do to improve my retirement lifestyle?
There are a number of simple things that you can do to improve your retirement.
Firstly, there's your retirement age. Who says you have to retire at age 65? You might like to retire a little later or earlier.
Then there's your annual income in retirement. Reducing the amount of income you require in retirement just slightly can have a big impact on how long your funds can last.
Generally speaking, the more income you draw each year, the faster your money will run out. And, if you're still working, you could consider consolidating multiple super accounts and topping up your super. Even just a little extra now could make a big difference at retirement.
What mix of assets can help make my money last longer?
You can also look at how you structure your assets. As a general rule, Centrelink treats assets held inside and outside of super differently, so you might like to investigate the effect of changing the amount of assets you hold outside of super. Restructuring your assets may impact the amount of Centrelink benefits you receive and the amount of tax that you pay.
You might also want to think about how your funds are invested. It obviously depends on how comfortable you are with risk, but the general rule is more aggressive mixes come with the potential for greater returns – but the risk of lower returns is also higher. We can help you decide on the most appropriate asset mix for your personal circumstances.
Want to know more?
We have a range of smart strategies to help you build for a better retirement. Of course everyone’s financial needs are different, so please call us today to help you build your own personal roadmap towards your ideal tomorrow.
What you need to know
Information current as at February 2011. This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances. Some of the information in this article is based on our interpretation of the law. It is a summary of the subject matter covered and is not intended to be comprehensive legal, tax or financial advice. No reader should act on the basis of this article without obtaining specific professional advice. Further details are available from your planner or AMP Financial Planning Pty Limited, telephone 1300 157 173..
*Based on 2006 Life Expectancy tables.
