The perfect retirement looks different to everyone, but what people do have in common is the need to have some sort of plan in place.
Vanguard’s ‘How Australia Retires’ report found that young Australians are quite confident about their retirement plans but that confidence continues to wane as they get older.
Of the more than 1800 working and retired people over 18 who were surveyed by Vanguard, almost two in three Australians have never engaged a financial adviser to help with their planning.
For those who haven’t sought advice, 75% were not confident about being able to fund their retirement.
What you must do
Know when you can access your super. If a person is before 1 July 1960, they can access their super at age 55, born between 1 July 1960 to 30 June 1961 at 56, 1 July 1961 to 30 June 1962 at 57, and 1 July 1962 to 30 June 1963 at 58.
It is highly likely the person accessing their Super will have to wait longer to access the Age Pension if they qualify. For example, if the person is born on, or after 1 January 1957, the qualifying age is 67.
In March, the Association of Superannuation Funds of Australia revised the modest and comfortable lump sums needed to retire to reflect the high rate of inflation, and that there has been no real increase in the Age Pension as price growth has been greater than the increase in average wages.
What is considered a modest and comfortable retirement lifestyle for younger retirees?
A modest retirement lifestyle is considered better than the Age Pension, but still only allows for the basics.
A comfortable retirement lifestyle enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.
Both budgets assume that the retirees own their own home outright and are relatively healthy.
Superannuation balances required to achieve a comfortable retirement
The lump sums required for a comfortable retirement assume that the retiree/s will draw down all their capital, and receive a part Age Pension.
The comfortable lifestyle for a couple is $690,000 and comfortable lifestyle for a single person is $595,000.
The lump sums needed for a modest lifestyle are relatively low due to the fact that the base rate of the Age Pension (plus various pension supplements) is sufficient to meet much of the expenditure required at this budget level.
A modest lifestyle for a couple is $100,000 and modest lifestyle for a single person is $100,000.
It’s never too late or too early to take steps to maximise your super.
While you’re still working, consider making voluntary contributions to your super to increase your balance. Even adding small amounts can make a huge difference over the long term. Any extra contributions could also be tax deductible.