Are you ready for retirement yet?
Getting close to retirement and haven’t decided how to fill that free time? An extended break from work can give you an idea of what retirement could be like.
Retiring is no longer something Australians feel they need to do when they turn 60. Rather, a ‘right’ time to retire is increasingly becoming a decision that’s up to the individual. Indeed, the FSC-CBA Older Workers Report 2015, which is based on research conducted by the Financial Services Council (FSC) and the Commonwealth Bank, indicates that workers aged between 50 and 74 are in no hurry to retire and 72% of those surveyed are happy to keep working (up from 53% in 2012).
“Retirement at 60 – unless it is due to poor health or caring responsibilities – is beginning to seem redundant,” says Sally Loane, CEO of the Financial Services Council (FSC).
Why are Australians willing to stay in the workforce?
Financial security and the need to save for retirement are the main reasons chosen by the majority of older workers (61%), although half of them also cited job satisfaction as a key factor in wanting to work.
What’s more, the Report indicates that Australian workers are feeling more supported in the workplace. They’re experiencing less barriers to keep working and almost half of the respondents say they have experienced no barriers at all.
Why do Australians retire?
As with the number one reason chosen for staying in the workforce, financial security is the top answer for deciding to retire. Out of the respondents who had retired, 28% said they felt financially secure enough to retire, followed by health reasons (23%). It’s worth noting that spending time with family and friends is the most likely reason why workers between 50 and 54 would retire.
For many people, retirement is no longer a step-by-step, linear process, but much more of a unique journey determined by the individual’s life events and personal situation.
How much money is enough to fund a comfortable retirement?
As a guide, the Association of Superannuation funds of Australia (ASFA) benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation, and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.
According to ASFA’s September 2016 figures, couples aged around 65 need to spend $59,619 a year and single people aged around 65 need to spend $43,372 a year to live comfortably in retirement.1
A more individualised way of working out a dollar amount might be to calculate how much of your annual after-tax income you’ll need when you retire and then fine-tune that figure depending on the type of lifestyle you want in retirement. Don’t forget to factor in both inflation and life expectancy.
After all, Australians are living longer and healthier lives than ever before. As with any big decision, you may want to seek professional advice.
So what are some of the ways you can get your retirement savings on track?
Put your super into one account
Combining your super reduces the administration fees you have to pay. However, keep in mind exit fees, as well any tax, investment and insurance implications if you decide to change funds.
Top up your super
Voluntary contributions could come from your before-tax income (known as salary sacrificing) or from sources that have already been taxed, such as your take-home pay or savings. There are limits to how much you can put into super, but if you’re mindful of them, making voluntary contributions could be a tax-effective way to grow your retirement savings.
Get professional financial advice
A financial adviser can help you make the most of your money and investments, so you can get on track to retire when it suits you.
1 ASFA Retirement Standard. ASFA’s calculation assumes you own your own home.
View the full FSC-CBA Older Workers Report