Financing Your Retirement

You’ve worked hard all your life and now you are looking forward to your retirement and doing some of the things you had no time for while you were still working full time. How do you make sure you have enough money to do this? Liam Shorte of MYOB points out that the amount of money you will need in your retirement will depend on your health and life expectancy. The Australian Bureau of Statistics shows that the average life expectancy for men is 86 years and for women, it is 90. This will let you know the number of years for which you need to plan.

How Much Money Will I Need?

Apart from your health and your life expectancy, work out a budget of what you anticipate you will need for a reasonably comfortable life. Industry Fund Services suggests that this may be between $60,000-$80,000 per year depending on your habits, style and travel ambitions. Don’t forget that you may need a new car in 26 years. A common rule of thumb is that you need approximately 15 times the annual amount for which you have budgeted. This means you will need a minimum of $900,000. Let us assume that you have at least this much in your super fund or as other assets, this is not all that you should consider.

Below Are 5 Tips to Help You Plan For Your Retirement Finances:

Get Professional Advice

Before you start your retirement, get professional advice on how to access your super fund. Basically, 2 types of income streams are available to you from your super fund, namely an account-based pension or an annuity. Do not rely on friends or relatives for advice. While they are sure to be well-meaning, you need proper professional advice.

Budgeting For Your Future

If you have elected to draw down your pension from an account-based plan, you can draw down as much as you like, even all of it in one go. There are minimum amounts you must draw down depending on your age. It is therefore important to plan and not to draw down too much in the early part of your retirement, given that you may well live for another 26-30 years, hopefully in good health. If you have elected to take your pension as an annuity, you will get a fixed sum during the nominated period.

Take Advantage of Your Entitlements

Money Smart will let you know that as senior many government benefits are available to you, eg travel concessions, cheaper medicine, reduced council and water rates. The Seniors Card can give you cheap travel as well as discounts at some stores. Even if you have a comfortable sum in your super fund, you are still entitled to such benefits.

Diversify Your Investments

Don’t put all your eggs into one basket. Discuss investment opportunities with your financial adviser and keep track of your investments. The share goes up and down as does real estate from time to time. You may want to sell some of your portfolios if your health deteriorates or you want to travel or change your accommodation and move into a retirement village. 

Retirement Villages

Many retirement villages are set up like 5-star resorts, with swimming pools, golf courses, billiard rooms, libraries, restaurants and other recreational facilities. The upkeep of these facilities is very expensive. Think about your health and how much you will really use such facilities. Always get legal advice before buying a unit in a retirement village, since deferred management fees can be as high as 40% of the value of the property when it comes time to sell it. This is even if it is a stratum title unit and you have been paying strata levies throughout the period of your occupancy. According to The Sydney Morning Herald, there are many hidden costs.

Gisela Ramensky BA LLM writes for CreditCard.com.au, she worked for over 30 years as a commercial and litigation lawyer, also in the areas of both corporate and personal insolvencies, advising numerous clients facing bankruptcy, as well as acting for financial institutions in the area of debt recovery. She was a member of the Council of the NSW Law Society for 3 years, a member of the Business Law Committee for 4 years and chaired 2 other committees. For the last 20 years, she operated her own practice at North Sydney and is now retired.

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