Developing a retirement savings plan
Some sensible strategies can help you make the most of your assets to enjoy a fulfilling retirement. Don’t leave it all to chance. Discover how to get started today to enjoy a rewarding tomorrow.
How am I tracking to live the life I want in retirement?
There is no magic figure that shows how much all of us need in retirement. The important thing is to understand the sort of retirement lifestyle you hope to enjoy and determine how much annual income you might need to fund this goal.
One strategy that can give you a good idea of your desired retirement income is to write up a retirement budget. It can show how much income you will need but also let you fine-tune your ideal lifestyle if it looks like you may need to scale back your plans.
Strategies that may help you save for retirement
It’s often only when we are approaching retirement that the reality of the financial side of things becomes completely clear. Unless you plan to rely solely on the age pension (which only provides for a very basic lifestyle), it may be worth looking at ways to boost your retirement savings in your final working years.
There are a number of ways to do this.
1. Explore your super contributions
For starters, you may be able to increase your pre-tax super contributions. You may like to talk to your employer about making contributions via salary sacrifice. This is where part of your pre-tax wage or salary is directed to super instead of being paid directly to you.
Or you may be able to make a contribution out of your own pocket. Super savings are only taxed at 15%, but be aware of the contribution caps.1
2. Consider your spouse’s super
If you have a spouse or partner, it may be worth making a contribution to his or her fund. Be aware, annual limits on super contributions do apply. Contact us to further discuss these limits.
3. Explore your super investment strategy
Now is also the time to review your super fund to check that your nominated investment strategy is in line with your tolerance for risk.
Many pre-retirees are tempted to shift their super into low risk, conservative options, but bear in mind you could have 20 or even 30 years of living ahead. It could pay to have at least part of your retirement savings, including super, invested in growth assets that could generate long term capital gains.
4. Explore a transition to retirement pension
Another option to consider is using part of your super to purchase a transition to retirement pension. When combined with salary sacrifice super contributions, these pensions may help you increase your super while making up the balance of your take home pay with an income stream from your fund.
Pay off the mortgage or grow super?
If you still have money owing on your home loan, you may be wondering whether it is better to use any spare cash to pay down this debt or add the money to your super. Everyone’s situation is different and we would need to look at your personal circumstances to provide advice.
Lending a hand to the kids
You may have plans to give your adult children or grandchildren a financial helping hand when you are retired. Just be sure you have sufficient funds in place to secure your own lifestyle first before offering financial assistance.
What about a self-managed super fund?
A self-managed super fund (SMSF) can have real pluses, allowing you to have complete control over how your super is invested (within Tax Office guidelines).
We’ll be happy to explain if a SMSF is right for your circumstances. Managing your own retirement savings is a significant responsibility – and one that comes with costs of its own.
In addition to determining if you have sufficient capital for a SMSF to be worthwhile, consider whether you really want the added responsibility.
Investments outside of super
Along with your superannuation, it is a good idea to grow your investments outside of super. This may give you a diversified pool of funds to draw on as well as providing some protection against any unexpected legislative changes to super.
Downsizing the family home
Downsizing to a smaller property could offer the benefit of a lower maintenance home, an opportunity to be closer to family and a way to access any potential home equity.
It is worth crunching the numbers to be sure downsizing puts you in front financially. The upfront purchase costs, notably stamp duty, on your new home can take a bite out of your available cash.
There may be other options worth looking at, such as a reverse mortgage, which allows you to harness any home equity you may have without the need to sell a much loved family home.
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.