PRE-RETIREES ARE TOPPING UP THEIR SUPERANNUATION
Almost one-third of Australians topped up their super in the last 12 months, contributing additional funds over and above employer contributions, according to MLC’s Australia Today report (August 2016).
It’s a positive sign that Australians are taking proactive steps to plan for a comfortable retirement lifestyle, rather than relying on government support or an inheritance. With the average life expectancy extending into our 90s, we’re living longer and our super will need to last – that’s if we want a comfortable retirement.
SUPER TO SEE YOU THROUGH RETIREMENT
Super is increasingly on our radar, with more than half of Australians believing their superannuation will be enough to see them through their retirement.
Those with financial planners/advisers (76%) and those with accountants (63%) were much more likely to agree that they expect to rely on their superannuation in retirement rather than government support.
So what’s the big deal about super? A healthy super balance could enable you to retire early, access more lifestyle choices in retirement, have more control over how much you can spend and potentially provide more enjoyment of life once you finally stop working.
MORE PEOPLE ARE EXERTING CONTROL OVER THEIR SUPER
The Australia today report revealed that over one quarter, or 27% of Australians consolidated their super during the 12 months prior to the research.
Exerting control over your super can help you grow your savings faster. Find and consolidate multiple accounts. Make proactive investment decisions and top up where you can. When you consider your super may need to last 20 years or more, the changes you make now could have a substantial impact on your level of comfort in retirement.
FINANCIAL PROFESSIONALS MOTIVATE US TO TAKE CONTROL OF OUR SUPER
The report also showed that those with financial advisers are even more motivated to build up their super. They would contribute almost 3 times the amount of a windfall or lump sum to super, than those without a financial adviser.
35% of people with financial advisers and 25% of people with an accountant have a personal superannuation fund, selected by themselves rather than their employer. 21% of people with financial planners and 14% of people with an accountant have their own self-managed super fund.
Laura Demasi, Research Director for the Australia Today report comments:
“When it comes to retirement confidence, it’s all about super. Those with a super shortfall will have the biggest adjustment in lifestyle when they stop working.”
PREDICT YOUR RETIREMENT SPEND, BY LOOKING AT YOUR CURRENT SPENDING PATTERNS
So how much will you need to live on when you stop working? It shouldn’t take you too long to work out.
Take a pen and paper and write down how much you spend weekly on eating out, entertainment, sport, exercise and hobbies. Look at your other fixed and variable expenses that continue when you’re retired, like the cost of your phone and internet, gifts, clothes and an annual travel budget.
Remember the cost of car registration, doctor appointments, medicines, energy bills, water rates and public transport are either free or heavily discounted with a Pensioner Concession card.
Take a look at your list and consider what expenses will continue, increase or decrease when you stop working. You might be surprised at how much you’ll need.
WHAT DOES THE AVERAGE RETIREE SPEND?
The Association of Superannuation Funds of Australia (ASFA) provides a retiree budget estimate that is updated quarterly. It includes general living expenses for couples and singles aged between ages 65 – 85.
HOW BIG IS YOUR SUPER GAP?
To work out the shortfall in your super lump sum and your expected spend (your super gap) is a bit more complex. It’s not just as simple as dividing the lump sum by the amount of years you expect to live after you stop working. Remember that the lump sum continues to grow while it’s invested and you’re drawing down on it.
IT’S NEVER TOO LATE TO BOOST YOUR SUPER
If you super balance isn’t where you’d like it to be, there are a range of things you can do to boost it, including:
- finding and consolidating lost or unused super accounts
- topping up your super
- changing your investment options
- receiving an inheritance, and
- working longer and delaying retirement.
A financial adviser can work with you to find the best super strategy for your circumstances to help you enjoy a comfortable retirement.
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Fionne McKillop is principal financial planner at McKillop Financial Planning and owns her own law firm McKillop Legal, which is expert in estate planning, business succession and commercial law.
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