Make your super last
Australians enjoy one of the highest life expectancies in the world, which means you can look forward to a long and comfortable retirement. Here's how to make sure your super lasts.
1. Determine how much is enough
If you're losing sleep over your golden years you're not alone – almost half of all Australians worry they don't have enough to retire on.1
So, let's start with a ballpark figure: $43,665 per year will provide you with a comfortable lifestyle, or $59,971 if you're embarking on retirement with your partner.2
But just how much you need is relative to the lifestyle you've become accustomed to.
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.
For a more tailored budget estimate, use the Colonial First State retirement calculator and speak to a financial adviser.
2. Pay down debt
Going into retirement without owning the roof over your head is certainly not ideal. However, if you’re a homeowner, the ongoing mortgage repayments alone will significantly eat into your annual budget.
To help avoid this happening, with the assistance of a financial adviser you may choose to adopt a cashflow and asset management system to allow you to pay off your home more quickly and boost your retirement savings considerably.
Other strategies include downsizing, selling assets or re-allocating assets to your spouse, giving you more money to pay down debt.
3. Look at your super
Your super balance may be a little lacklustre if you've been self-employed, earning a lower wage or had money sitting in a poorly-performing fund.
And that’s why topping up your super can help maximise your retirement income.
Voluntary contributions could be pre-tax (for example, salary sacrifice or personal contributions for which you claim a tax deduction) or after-tax, such as contributions from your take-home pay or savings.
There are limits to how much you can put into super before extra tax applies, but if you’re mindful of them, making voluntary contributions could be a tax-effective way to grow your retirement savings.
Also, it’s worth considering putting your super into one account.
Combining your super may reduce 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.
4. Consider non-super strategies
Depending on your lifestyle and life stage, strategies that don't tie up your funds in super will be important.
Non-super strategies can include property investments or shares, and can leverage the equity in existing assets.
This may include looking at investing in growth assets over a longer term to achieve a potentially stronger return and using that to pay down remaining debt closer to retirement, or build an income stream outside super.
You can also consider more tax-effective arrangements such as using a mortgage offset account, putting assets in your partner's name or establishing a family trust.
5. Just do it – take the first step
Whether your dreams for retirement involve travel, more time with the grandkids or a new home in a retirement village, you need to take the first step and make a plan.
It’s important to feel confident you have enough retirement savings before you stop working. So if you’re not sure if you’re ready, a financial adviser can help. They can advise you on all the options you have available to make those dreams a reality.
2 ASFA Retirement Standard March quarter 2017. ASFA’s calculation assumes you own your own home.