Nothing is more certain in life than death, taxes and change! And as in just about every other segment of life, Australia’s financial landscape is forever changing. But are your plans keeping up with the changes or are you, like many Australians, thinking it’ll all be okay at some mythical point in time – when you retire maybe?
Imagine this – you’re heading towards your 67th birthday and it’s almost time to retire, which means years ahead of no stress and not a care in the world, right? Consider this, ‘Ladies who Lunch’ can’t possibly lunch without money in the bank. And that dream weekender you’re planning on purchasing isn’t going to pay for itself – even if you downsize. Have you considered the years of medical assistance you might need at the back end of your life that’ll need funding – without leaving your spouse penniless? Probably not, huh?
Why is that? I guess because ‘retirement’ seems like a magical faraway thing that appears from a distance of 20, 30, 40 years like a mirage in the distance.
The real issues around super that have encouraged a level of disengagement are;
- Many people don’t quite understand what super is actually about
o People think of it as a savings mechanism and then don’t like the fact that their money is tied up ‘forever’ – aka until retirement. But really it’s a tax saving mechanism. For example, if you’re on the top tax rate (currently 49% including the medicare levy and the temporary budget repair levy) would you rather pay 49% tax on your money before it goes into your savings account and tax on your earnings every year. Or would you rather pay 15% tax on your super contributions and be able to withdraw tax free on retirement. Something to think about.
- They don’t feel they have any real control over their money
o once upon a time, this was absolutely true. But not any longer. Now you can work with your fund to decide whether you want to take growth options, stability options, green options, international market options – the choice grows by the year. And there’s always the option of a self managed superfund or SMSF.
- The government keep changing the goal posts.
o This makes for an interesting mental hurdle for many to overcome in terms of maintaining any kind of level of interest. True – but you’re still likely to retire at some point and will need to be able to fund yourself.
While the current age of retirement in Australia sits at 67, an increase by a few years in the near future isn’t entirely unforeseeable. For Gen X and Y, this might even mean your ‘retirement’ is pushed back until 70.
But regardless of the age at which you’re planning to retire, have you planned to have enough?
According to a recent survey by HSBC, Aussies can expect to spend around 23 years in retirement. But, and this is the real kicker, for most their savings will only last around 10 years.
In fact, 36% of those Australians who’ve already retired now say they wish they’d started planning and saving for their retirement when they were 30. And the real numbers bear this out. In fact, they are quite scary when you look more closely. $42,500 is what’s considered a comfortable household income in retirement. Yet, those same 36% are living on less than $35,000 a year. And $7,500 is the equivalent of spending $140 a week on groceries – ie: it can make a sizeable difference.
Some wise person once said, the best time to plant a tree is 20 years ago or today. Meaning if you didn’t start 20 years ago, best put your back into it today.
The same goes for your retirement planning. Now is the time to put your strategic planning in place. And, if you were thoughtful enough to really think about it 20 years ago, maybe it’s time for a strategic review.
Of course, if we can help you set up an SMSF, manage your reporting/audit requirements or point you in the direction of a good financial planner (we’re not allowed to advise on investments), we’d be delighted to help. You can drop us a note orgive us a call on 02 6023 1700.