Here’s the cold, hard truth: you aren’t getting any younger. If you want to ensure that your future self won’t drown in financial uncertainty, you’ll need to begin taking steps as soon as today to plan for a secure retirement.
That said, financial planning is so much easier said than done. It’s easy to get sidetracked and end up overspending, undersaving, or both—leaving your savings account floundering at dangerously low levels.
On top of that, the prospect of learning complex financial jargon is not something everyone’s equipped to understand from the get-go.
If retirement age is fast approaching, it’s time to step up your game. Wherever you are in your financial journey, this article will provide some useful insights on how to plan for a secure retirement in Australia.
Let’s get cracking!
Know How Much You’ll Need
Before anything else, it’s important to develop a fundamental understanding of how much money you’ll need to fund your post-retirement lifestyle.
The first step is to calculate how much money you have in your balance. Then, calculate how much you can periodically get through sources like your super funds. Once you have a ballpark figure, estimate how long it will last you.
With this information, pair it against how much money you believe you’ll need after retirement. These post-retirement savings will vary from person to person depending on their lifestyle, time of retirement, and future life plans, so be sure to factor these in when planning.
As a general rule of thumb, the average Australian citizen would need to own their own home and maintain an annual income of about $47,000 to retire comfortably. Alternatively, getting at least two-thirds of your pre-retirement income per year is also considered a viable benchmark to maintain your standard of living.
Pay Attention To Your Super Fund
Australian employers have a legal obligation to make ongoing contributions to their employee’s superannuation fund.
The amount of the contribution is based on the current super guarantee rate. However, if you’re ineligible for a super fund or if you’re self-employed, you can also get the benefits of a super by managing your own Self Managed Super Fund (SMSF).
This fund continues to grow until the point of retirement. The more money your employer (or you) puts in, the larger your super will be when you eventually access it. You can typically only withdraw money from your super fund when you reach the preservation age and formally entire the retirement phase.
However, there are a few cases wherein the ATO can release funds, particularly during times of extreme financial hardship or valid emergencies.
To ensure that your retirement goes smoothly, ensure that your company is paying the correct amount of super to your funds.
Furthermore, you can also make your own contributions throughout your working life to grow your super. This way, you can live comfortably once your retirement period hits.
Invest Beyond The Super
Don’t solely rely on your superannuation funds as a way to manage your money for retirement. While it does offer excellent benefits, there are a multitude of avenues you can consider to build your wealth and derisk your financial position post-retirement.
For instance, you can consider putting some capital in the ASX market, buying real estate, or even investing in individual stocks that may be of interest to you. You can also check if you meet the requirements for an age pension to supplement your retirement savings.
Investing outside the realm of your super fund gives you a certain degree of control over your portfolio and increases the ceiling of your earning potential. That said, you’ll also have to keep your risk tolerance in mind, especially if you’re new to investing.
Consider Your Home
If you own a home, you are probably well aware of how expensive home maintenance can be. From the monthly utility bills to the neverending list of repairs, that initial downpayment is nowhere near the tail end of the total costs of homeownership.
Furthermore, post-retirement may make it difficult for you to get enough money to cover rental expenses. With Australian rental prices only continuing to soar over the years, it’s getting harder for elderly tenants to round up enough cash to cover their usual rent and living expenses.
With all these considered, it’s crucial to factor in your home when considering post-retirement plans. Many seniors consider downsizing their homes or moving with family to make up for the substantial loss of cash flow.
However, should those not be an option, a lot of forward-thinking seniors have also been seriously considering moving to a Living Choice retirement village and other similar arrangements to keep their costs low while still being close to amenities.
Bank on Your Savings and Term Deposits
No financial blog would be complete without preaching the importance of saving your money, and this one’s no different. Keeping your money stored in savings accounts—particularly those that yield a high-interest rate—is one of the safest and easiest ways for you to gain passive income post-retirement.
That said, the interest rate for money through these channels tends to fall on the lower end. If you intend to store your capital there without touching it, you can consider putting it in a term deposit to get a better return. This can be done on top of your existing super funds and investments as a way to diversify your portfolio.