Take These Steps to Set Yourself Up for Success in Retirement
When you’re young, retirement planning is the last thing on your mind. But it’s incredible how time passes and those birthdays add up, isn’t it?
It’s easy to lose track of time and put off retirement planning— but the consequences aren’t worth it, especially if you outlive your retirement savings, as about 51% of retired Australians expect to do.
So how much money do you need to retire well? According to the Association of Superannuation Funds of Australia, retired couples (65+) who want to live a ‘modest lifestyle’ require $40,829 a year, and retired couples who want to live a ‘comfortable lifestyle’ require $62,828 a year.
We spoke to IQ Capital Group’s Senior Financial Planner Susan Howard to find out what steps you should take now to plan for a successful retirement, how important having a property ‘nest egg’ is, and when and why you should talk to a financial planner to make the most of your golden years.
How to set up your superannuation to achieve your retirement planning goals
More than half of those aged 45 and over expect their main source of income during retirement to come from their superannuation and allocated pension. Superannuation is the linchpin in most Australians’ retirement plans. Is yours set up to maximise returns? Susan recommends taking the following steps and asking these questions to ensure your superannuation is working for you.
1. Establish a low-cost superannuation administration platform
Find out what you’re being charged for administration, investments and any associated costs.
2. Select investments that provide you with long-term growth
How are your investments allocated and do they match your tolerance for volatility? For example, what is the percentage of assets in growth vs. defensive funds? What’s been the return on investment over the last one, five and 10 years? Can you see the actual investments or are they not disclosed?
3. Ensure 10% of your employer’s superannuation contributions are made in FY 2021-2022
Ensuring your employer is paying your eligible Superannuation Guarantee payment regularly into your super account will help with compounding your account balance.
4. Consolidate superannuation accounts if you have more than one
This strategy will help you reduce fees and create a larger balance for long-term compounding, plus it will be easier to track.
5. Review any insurance that is attached to the account to ensure it is appropriate for your current needs
Some superannuation accounts include insurance. Assess whether this is appropriate for your needs. What are the premiums and how are they affecting your balance?
How does home ownership affect retirement planning?
Most Australians dream of owning property and factor this into their retirement planning. But in today’s super-hot property market, it can be a challenge to get on the property ladder.
“If you can’t afford to buy property right now, you should start building a nest egg by directing funds into a higher interest savings account, or start a small investment account to provide a greater return than the current cash rate,” Susan says.
“A nest egg without property can be achieved by using other asset classes and having a disciplined savings plan. However, this may not be as structured as an investment property strategy and may not provide as much tax planning relief,” she says.
If you are able to buy property, this is an effective way to build equity as you pay down the mortgage.
“Once the principal place of residence has been purchased and an amount of equity has been built up, then you have the opportunity to invest further, say in an investment property to assist in tax planning strategies. This is a way of funnelling savings that might otherwise have been spent on discretionary items into an investment property mortgage for the future,” Susan says.
Over time, the property value’s potential growth and the regular income you’re earning from your investment property can help build your retirement nest egg. When is the right time to talk to a financial planner about retirement planning?
The best time to engage with a financial planner, like IQ Capital Group, is when your financial position has changed significantly.
For example:
Have you just embarked on a new career or switched jobs? Talk to us about setting up and structuring your superannuation to assist you with saving for a deposit on a home.
Are you planning to or have you purchased property? Talk to us about ensuring you have the right insurance in place in the event of an unforeseeable event.
Are you a high-income earner? Talk to us about tax planning through superannuation contributions. Or perhaps you’ve been accumulating funds in an offset account and want advice on how to use these funds to return a better rate than the current interest rate.
Are you a pre-retiree? Talk to us to review and assess the assets you’ve accumulated to see if they’ll get you through your retirement and to find out what impact your age of retirement will have on your funds. Or talk to us about how to pay down debt and be debt-free in retirement.
Are you a retiree? Talk to us if you want to outsource your investment decisions on your pension accounts, and if you want us to review your financial position on a regular basis to provide you with peace of mind for the future.
Whatever age or stage you’re at, we’d be happy to help you plan your next steps so you have the retirement you’ve always dreamed of— vacations, mimosas on the beach? Yes, please.
Disclaimer: This content is not financial or taxation advice and no consideration has been given to any individual’s circumstances. You should only act on individual advice received from an authorised adviser.