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Are you retirement ready?

Date: Aug 15th, 2016

In Australia, you can really retire whenever you want to, but your health and financial situation will play a big part, which is why doing a bit of research and planning could go a long way.

Things to address before you retire

1. How much money will you need?

Industry figures from March 2016 show that individuals and couples, around age 65 who are looking to retire today, need an annual budget of $42,893 and $58,922 respectively to fund a comfortable lifestyle—assuming they own their home outright and are in relatively good health.1

To live a modest lifestyle in retirement, which is considered slightly better than living on the Age Pension, an individual needs an annual budget of $23,651 and couples, an annual budget of $34,064.2

2. How and when will you access your super?

Generally you can access your super when you reach preservation age, which will be between 55 and 60, depending on when you were born. Meanwhile, you’ll have a few options around what you do with your super—which after age 60 you can access tax free.

You may want to take it as a lump sum, move it into an allocated pension or purchase an annuity, but do think about it carefully as many Australians are looking at a retirement of 30 years or more and there could be tax implications.

3. Will you be entering retirement debt-free?

A 2015 AMP/NATSEM report found 78.3% of 50 to 65 year olds still had household debt3.

If you’ll be carrying debt into retirement, you may want to think about ways to reduce your debt. Our education module may be able to provide some ideas.

4. Have you reviewed your insurance?

You might have different types of insurance, but it’s worth checking you have the right type and that the amount you have is going to meet your needs in retirement. After all, what you require could be quite different when you’re no longer working.

Another thing to think about, if you’re tempted to reduce your outgoings by cutting back on things like insurance, is that 72% of AMP life insurance claims were made by people over 50 in 2015.4

5. Has your attitude to risk changed?

You have more time to ride out market highs and lows when you’re young, but when you’re closer to accessing your super and retiring, a more conservative approach to investment options within and outside of super may be appropriate.

A share market crash could be a lot harder to recover from than if you’ve still got decades in the workforce.

6. Will you relocate or downsize?

Your living arrangements in retirement should be based on more than just your finances. Your health, partner, family and what you decide to pursue once you stop work will all play a part.

But, if you are thinking of moving house to release money from your home, planning ahead could help you feel more in control and provide greater peace of mind.

7. Are you eligible for government entitlements?

You may be eligible for government entitlements, such as the Age Pension, but make sure you’re across the government’s changes to the assets test which take effect from January 2017.

Reports suggest that more than 300,000 age pensioners will have at least part of their pension cut, with just under 100,000 of these people losing all entitlements.5

8. What recreational activities are on your list?

Australians are living and remaining active for a lot longer, so don’t forget to give some thought to your physical and mental wellbeing, and whether you’ll need a bit of extra money to do things you enjoy—sports, hobbies, club associations, travel, dining out or volunteering.

9. Have you given a thought to estate planning?

Estate planning is not just about making a will. It’s deciding how you want to be looked after if you can’t make decisions later in life and documenting how you want your assets to be distributed after you’re gone. It can be a complex exercise, so you may want to seek professional advice.

10. Do you want to make any final super contributions?

The more you can put into superannuation, the more money you will have to retire on. And, if you salary sacrifice some of your before-tax income and put it into super, you’ll generally only be taxed at 15%, which is lower than most people’s income tax rate.6

Meanwhile, when it comes to your retirement goals, we could help you navigate tax and legal implications. Please contact us on |PHONE|.


1, 2 http://www.superannuation.asn.au/resources/retirement-standard
3 http://media.amp.com.au/phoenix.zhtml?c=219073&p=irol-reportsNATSEMArticle&ID=2121926 p.13
4 https://www.amp.com.au/news/2016/march/what-happens-if-i-let-my-insurance-lapse
5 http://www.superguide.com.au/how-super-works/300000-retired-australians-to-lose-some-or-all-age-pension-entitlements
6 https://www.amp.com.au/personal/super-and-retirement/education/take-control-of-your-super/superannuation-contributions/salary-sacrifice

Source: AMP August 11, 2016

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