Tag Archives: Retirement Planning

Five tips for a better retirement

By Robert Wright /November 03,2020/

Retirement is an exciting time. It’s the long-awaited reward for a lifetime of work and, if you’ve planned it correctly, it heralds a life stage synonymous with relaxation and enjoyment.

However, to make sure your retirement is everything you’d hoped for, it’s crucial to make smart decisions to help you stick to your financial plan, achieve investment goals and aid you in your transition.

If you’ve recently left the workforce or it’s in your near future, these five tips may help you secure a better and more comfortable retirement.

1. Understand your entitlements

Getting older has its upsides – there are certain benefits that come from being of retirement age.

Seniors over the age of 60 have access to cheaper public transport, health care and prescription medications by way of the Seniors Card and Pensioner Concession Card to help you live a more comfortable lifestyle. If you’re over the age of 66, you may also be eligible for the Age Pension.

Depending on eligibility, seniors can also access tax offsets, government loans or pension payments in advance to assist with immediate expenses, as well as reduced banking fees.

2. Free up some extra money

Having a little extra in the bank is always handy, especially when you’ve left the workforce. While there are a few ways you can free up some extra money, downsizing – or selling your current home to relocate to a smaller and cheaper one to access the equity – is one common option. Before you do that, however, you’ll need to make sure it’s the right move for you.

3. Identify where you can save a little or a lot

Full retirement with no access to work essentially means your income is capped, so it’s even more crucial that you understand where your money is going and adjust accordingly. Minimising your expenses can make a big difference to your long-term security so consider freeing up extra money by reassessing your utilities or insurance bills. Shop around for cheaper providers and consider creating a budget to help you reach specific financial goals and save for unexpected expenses.

4. Stay the course with your investment strategy

Although it’s not unusual for the market to fluctuate, it can be worrying to see your investments shift as much as they have in the wake of COVID-19 (coronavirus). But that doesn’t necessarily mean you should make any dramatic changes to your investment strategy.

Many investments often involve some amount of risk and, pandemic or not, an important step to navigate potentially choppy waters is to regularly check in with your strategy and your financial adviser.

5. Stretch out your working life (if you can)

If you’re of retirement age, you might have already begun the process of winding down work. Considering the current climate, however, your hopes for retirement may have changed since you made that decision.

It doesn’t have to be a long-term solution but working for a little longer – even part-time – could help you pay down any outstanding debt or top up your super savings for retirement.

Source: AMP

How to keep your super safe during COVID-19

By Robert Wright /October 16,2020/

If you’re feeling concerned about how the pandemic will affect your super balance, here are our tips to help protect and grow your super.

What can affect my super balance?

In Australia, your employer is required by law to pay a minimum percentage of your eligible income to a complying superannuation fund or retirement savings account. This is known as the Superannuation Guarantee and it’s currently set to 9.5%.

Your super contributions are then invested by your superannuation fund on your behalf, according to your chosen investment options. This means your super is subject to normal market fluctuations.

Your super is also exposed to a range of administrative fees, charges and premiums, which can eat away at your balance if you’re not vigilant.

Isn’t my super protected by law?

You might be surprised to learn that your superannuation savings are not protected by the government.

Last year, the federal government introduced a package of reforms to help stop low account balances from being eroded by unnecessary insurance premiums and fees. This was called the Protecting your Superannuation Package.

However, this protection only applies to accounts that meet certain criteria, such as having a balance below $6000, and not receiving any contributions for 16-months. These inactive or low-balance accounts are transferred to the ATO for administration. You can find out more about the reforms on the ATO website.

For everyone else, it’s up to you to keep an active eye on the health of your super.

So, here are five things you can do to help conserve and grow your superannuation, even during a global economic downturn.

1. Check your superannuation investment options

Because superannuation is a long-term investment, it’s important to check that your selected investment options are right for your age and stage of life.

Taking on the wrong level of risk at the wrong time in your life can erode your super balance. For example, when you’re starting out, there’s more time until retirement to ride out some of the ups and downs that come with higher levels of risk. But as you near retirement, you might want to focus on preserving your superannuation balance.

If you’re not sure how your super is invested, take the time to check your account either online or by contacting your super fund for advice. Be sure to find out whether they charge fees for advice, as these can be deducted from your super balance.

2. Switch to a low-cost superannuation provider

Fees and charges are deducted directly from your account, so they can quickly erode your super balance. Check your statements regularly and make sure you’ve compared your super fund with other providers.

3. Avoid withdrawing your super early

Most people can access their super once they reach the ‘preservation age’, which is between 55 and 65 years old, depending on when you were born.

There are also some special circumstances where you may be able to access your super early, such as severe financial hardship, including COVID-19.

While a cash injection of $10,000 or $20,000 might sound like a welcome relief when you’re struggling to pay your basic living costs, it’s important that you exhaust all other avenues first, because accessing your super early can have a significant impact on your retirement income.

How significant? Well, the FPA estimates, conservatively, every $1000 you have in super at age 30 is worth $4500 by the time you reach 60. Multiply that by $10,000 or $20,000 and you can see what you might be missing from your retirement nest egg.

For this reason, it’s really important to explore other options first and get expert advice from a financial planner before making a withdrawal.

4. Make regular contributions

One of the ways to protect and grow your super balance is to consider making regular contributions. You can do this by salary sacrificing a set amount every week. If that’s not possible, you could consider making extra contributions whenever possible, such as depositing your tax return, gifts or bonus.

5. Get professional advice

You can’t beat professional financial advice to help you reach your retirement goals. A financial planning professional can review your unique situation and goals and advise you on the right investment and contribution strategies for you. They can also advise you on the best forms of retirement income to conserve your super balance.

With the right superannuation investment strategies in place, you’ll be well prepared to weather the economic disruption brought about by COVID-19. It’s worth taking the time now to review and optimise each aspect of your super above to get the most from your investments.

Source: Money & Life

Superannuation 101: Your guide to a happy retirement

By Robert Wright /August 28,2020/

Superannuation is a handy way of saving for retirement, so that you’ll have an income to live on once you’re no longer working.

Your employer must pay a portion of your earnings into your superannuation fund, which invests them on your behalf.

How much superannuation will I be paid?

In Australia, your employer is required by law to pay your super contributions once a quarter.

The current superannuation guarantee (SG) rate is 9.5%. So, your employer must pay a minimum of 9.5% of your ordinary time earnings (OTE) to a complying superannuation fund or retirement savings account.

Can I add to my super?  

Yes, you can! Making personal contributions to your superannuation is a great way to reach your retirement goals sooner.

One way to do this is through a salary sacrifice arrangement with your employer. This simply means that you pay an agreed amount from your pre-tax salary into your chosen superannuation fund with each pay.

It’s a very tax-effective way to add to your super, as these contributions only attract tax at 15% (up to a certain level), which is generally less than your marginal tax rate.

How much to contribute depends on several factors, including how long until you want to retire and your retirement goals. Speaking to a financial planner can help you evaluate the best options for you.

Superannuation co-contribution 

You may also be eligible for contributions from the government to help you save for retirement. The super co-contribution and the low-income superannuation tax offset are both ways the government can add to your super. Find out more about government contributions on the ATO website.

How much super do I need to retire comfortably?  

Research shows that many of us underestimate how much we’ll need to live comfortably in retirement.

According to the MoneySmart website, how much you’ll need depends on your big costs in retirement and the type of lifestyle you want to have. “If you own your own home, a rule of thumb is that you’ll need two-thirds (67%) of your pre-retirement income to maintain the same standard of living.”

The Association of Superannuation Funds of Australia (ASFA) estimates that single people will need just over $44,000 a year to be comfortable, while a couple will need just over $62,000 (excluding housing costs).

A ‘comfortable’ lifestyle is defined as one where you’re able to take part in a range of leisure and recreational activities, while maintaining a good standard of living i.e. you can afford to purchase household goods, private health insurance, a reasonable car, clothes and domestic or occasional international travel.

When can I access my superannuation?

You’ve spent years building up your nest-egg, so when can you make use of it? You can access your super once you meet one of the following conditions:

• when you turn 65 (even if you haven’t retired)
• when you reach the preservation age and retire; or
• under the transition to retirement rules, while continuing to work.

There are also some special circumstances where you may be able to access your super early, such as severe financial hardship, including COVID-19.

Source: Money & Life

How to budget for your social life in retirement

By Robert Wright /August 28,2020/

If you’re in or approaching retirement, you may be prioritising things such as living costs, utility bills, health care and even potentially helping the kids out with their future financial goals.

With many Australians looking at a retirement (which in reality, could span a few decades), another thing to give some thought to is keeping some money aside for your own recreation and social life.

What activities are on your to-do list?

Think about what you enjoy doing, what you’re likely to want to do more of, or even get into with more time on your hands.

• Eating out – restaurants, beach barbecues, picnics, food fairs
• Travel – interstate breaks, overseas holidays, road trips, caravanning
• Entertainment – cinemas, concerts, events, stage shows
• Sport – golf, tennis, cycling, yoga, pilates
• Hobbies – fishing, sailing, photography, drawing, woodwork
• Volunteering – hospitals, soup kitchens, animal shelters
• Club associations – Rotary, Leagues, Surf Life Saving
• Tournaments – trivia, bridge, chess.

How can you budget for the things you enjoy?

If you need a guide, the Association of Superannuation Funds of Australia (ASFA) benchmarks the annual budget needed to fund a comfortable and modest standard of living in retirement, with figures based on an assumption people own their home outright and are relatively healthy.

According to June 2020 figures, individuals and couples around age 65, looking to retire today, would need an annual budget of $43,687 and $61,909 respectively to fund a comfortable lifestyle, or $27,902 and $40,380 respectively to live a modest lifestyle.

According to ASFA, a comfortable retirement lifestyle would enable an older, healthy retiree to be involved in a broad range of leisure and recreational activities, whereas a modest retirement lifestyle would enable an older healthy retiree to afford more basic activities.

How much are you likely to spend on recreation anyway?

According to research, singles and couples (aged 65 to 85) living a comfortable lifestyle in retirement would spend about $184 and $277 of their weekly budget respectively on leisure and recreation.

This takes into account a broad range of recreational activities, including:

• Lunches and dinners out
• Domestic and international holidays
• Movies, plays, sports and day trips
• Things like streaming services
• Club memberships.

Making your money go further for the fun stuff

• Make use of your Senior’s Card for transport concessions and other discounts
• If going overseas isn’t in your budget, you could consider a road trip interstate
• Pack a rug, food basket and esky, and head to the park or beach for a picnic
• Swap a visit to the day spa with a DIY manicure and candle-lit bubble bath
• Have the troops over for a poker night or take turns hosting dinner parties
• Find cheap accommodation on Airbnb or consider listing your own place to earn money while you’re away.

Source: AMP Insights