Tag Archives: Retirement

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

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

Why it’s important to think about insurance ahead of retirement

By Robert Wright /June 01,2020/

Finding the right level of insurance cover is important when you’re thinking about retirement.

If retirement’s coming up on your horizon, the impact of COVID-19 (Coronavirus) may have thrown a warehouse-sized rack of spanners in your planning.

It makes sense to concentrate on things you can control, such as insurance. Too-high premiums can chew away at the foundations of your savings, at a time when they’re more important than ever. Under-insure and one day your floor may collapse, undone by events you can’t foresee.

Cover for a changing life

A good way to get started is to think about what you really need, and what you don’t. As you get close to retirement, you may want to make sure you’re holding the right insurance for the lifestyle you want.

Here’s a simple checklist that may help:

1. Ask yourself how much money your family would have if you were to pass away or become disabled.
2. Compare that with how much money your family might need in the same situation, including how they’d manage paying for day-to-day costs like child-care and mortgages.
3. The difference between the two can help you work out how much insurance you may need.

Many of us take out insurance and are done with it – it’s enough to know we have the proverbial rainy day covered off. However, with economic clouds gathering, now’s a good time to review what you’ve already got and assess if it’s still right for you and your needs.

So, dig out your existing insurance agreements, taking special note of when they’re due to expire and your continued eligibility for the policies they hold.

An important area for many Australians is insurance held inside superannuation.

Insurance inside super

Insurance inside super can help us out when we really need it. Like any type of insurance, it works best when you’ve got the right level of protection for your situation. As you head towards retirement and your life changes, so might your priorities.

As well as life insurance, you might have total and permanent disablement (TPD) inside super. TPD cover may provide you with a lump-sum payment if you suffer a disability that prevents you from ever working again.

TPD could help you pay for ongoing medical expenses, alterations to your home to make day-to-day life easier and help provide future financial stability.

Total salary continuance, also known as income protection, is designed to pay a monthly benefit of up to 75% of your pre-disability regular income if you’re unable to work due to injury or illness.

Typically, within super, income protection provides you with cover either for a two-year or five-year period or until you turn 65, depending on the terms in your employer plan.

What to look out for

There are pros and cons of insurance within super. Things to think about if you’re approaching retirement include:

• Cover through super may end when you reach a certain age (usually 65 or 70). That’s generally different to cover that’s outside a super account.
• Taxes may be applied to TPD benefits depending on your age.
• Claim payments may take longer, as the money is normally paid by the insurer to the trustee of the super fund before it’s paid to you or your dependants.

Don’t double up and stay flexible

As part of your review, it’s also a good idea to check insurance you hold inside super against other policies you might have outside super.

Then compare your cover, check whether you have any insurance double ups – if you have more than one super account with the same type of insurance, you may be paying for more insurance than you need.

As well as comparing the level of cover you get, consider any exclusions, such as the treatment of any pre-existing medical conditions, and waiting periods. Remember that if you do cancel your insurance, you might lose access to features and benefits and may not be able to sign back up at the same rate.

It’s also important to disclose your situation to your insurer honestly. Otherwise, the insurer may be entitled to refuse your claim.

Tricky times call for flexible thinking. Volatility can be daunting, whatever age you are. Fortunately, you’ve got the life experience to look beyond the headlines and adapt to changing circumstances. Reviewing your insurance is as good as any place to start.

 

Source: AMP