Insights
Finding the path to comfortable retirement
Pull your head out of the sand and start safeguarding your future prosperity
66% of Australians feel like this about retirement
Australians continue to ignore the need to save for their future according to the recent IPSOS report “Australia Today” commissioned by MLC. Shining a strong spotlight on the failure of many Australians to adequately plan for their future, the report found that 66% of Australians participating felt unprepared for retirement, with only 15% feeling as though they had their retirement plans under control1. But while many Australians continue to ignore their future, what exactly is the financial reality? How much do we need to safeguard our retirement years, not just “getting by” but living in comfort, enjoying our days and remaining active well into our 70’s and even 80’s?
How long is retirement exactly?
Not only are Australian’s in denial about how much they need, they’re also underestimating how long they’ll need it for. When do you plan to retire, and how long do you think you’ll live? Ok so maybe the second part of the question is a little tricky but we’ve got some statistics to help you. According to the ABS, a person aged 65 has a nearly 75% chance of making it to 84. And a 50% chance of reaching 872. Of those twenty or so retirement years, 15 (75%) of them are expected to enjoy years of relatively good health and activity3. It’s good news of course, you’re far more likely to be out and about experiencing life than bedridden or debilitated. But it does raise the question of funding. Do you have enough put aside to fund this kind of longevity?
How much do you really need?
On current calculations, for couples to live comfortably in retirement, they need $58,922 per annum. To live modestly, they’ll need $34,064. Single retirees need between $23k and $43k4. Extrapolate the comfortably living couple’s annual requirements with the nearly 20 years they’re likely to live and you’re looking at a pure lump sum of about $1.2m. These figures are rough but we’re just using them to make a point.
Which is?
Have you checked your super balance lately? Is it tracking towards the figure you need? Can you feel comfortable you’re prepared for retirement? Are you one of the 66% of Australians who are not at all prepared for retirement? Or the 15% who are under control?
Are you ready for retirement?
OK you’ve convinced me, what do I do now?
If our reality check has worked and you’re thinking “maybe it’s time to pull out my saving’s finger”, we have a few ideas for you.
Start making extra contributions
Consider investing some after tax dollars in your super fund. Set up an automatic bank transfer. Just $50 a month will add up to $6000 over 10 years. Try saving $100. Ask your partner to do it too. Set and forget for a nice surprise later on.
Sign up for salary sacrifice
Send your salary to super before you can get your hands on it. Your employer may be able to pay a percentage of your salary directly to your superannuation (this is on top of the compulsory 9.5%). The money is locked away, so you can’t “accidently” spend it, and you only pay 15% tax on the income unless you earn over $300k (then it becomes 30%).
Implementing the ideas above will definitely make a difference, but there’s an even better way to increase your odds of a comfortable retirement. In fact, it’s proven to work better than any other method.
Get yourself a financial planner.
Do this and you’ll become more active, realistic and confident in your superannuation planning. MLC’s IPSOS study showed that of those receiving financial advice, 35% of them felt well prepared for retirement. Only 9% of those not receiving financial advice could say the same1. A Modoras financial planner will force you to look at where you are in retirement savings, and where you need to be. Then they’ll help you fill the gap.
Join the 15% of Australians who are prepared for retirement
Everyone wants a comfortable retirement. No-one wants to scrimp and save through their final years. But many Australians are failing to plan properly for their future, with the result, that, come retirement, they risk finding themselves without the nest egg they need for the 20 odd years they’re likely to live.
If you want your retirement to simply be a continuation of your existing comfortable lifestyle, seeking professional financial advice is the first logical step. A financial planner will identify, once and for all, whether there is likely to be a shortfall in your superannuation savings when you retire, and what can be done to fix it. The sooner you act, the sooner you can start working on reducing any shortfall.
Ready to fill that superannuation gap? Modoras has a team of experts ready to help you plan your retirement. Contact us on 1300 888 803.
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Over to you
Have you used a financial planner for your superannuation? Do you wish you had? It might be decades away or it might be around the corner. Either way, retirement requires serious planning and foresight. The sooner you start, the better the chances that you will be able to achieve your goals. We have listed 10 tips to prepare for retirement.
Sources:
1 MLC Australia Today Report conducted by IPSOS released 2016 in three parts.
2 Australian Bureau of Statistics, Life expectancy (years) at birth by sex, 2014.
3 Based on data from the Australian Bureau of Statistics, Life Tables, States, Territories and Australia, Nov 2014. Australian Institute of Health and Welfare, Australia’s health 2014, May 2014.
4 ASFA Retirement Standard, March Quarter 2016
IMPORTANT INFORMATION: This blog has been prepared by Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licences (No. 233209), located at Level 3, 50-56 Sanders St, Upper Mt Gravatt Q 4122. The information and opinions contained in this fact sheet are general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this fact sheet can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.
