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A lot of clients visit our firm. One of their biggest unknowns is, “how much money is needed to retire? This is a very important question and the answer is different for everyone. A general misconception is you need minimum of $1 million in superannuation; however, this isn’t always the case.

It’s best to think in terms of how much you actually need to spend in retirement p.a. On average, a single retired person spends around $40,000 p.a. and a couple around $50,000 p.a. to live comfortably. Some require less, and others have a need for more.

Think about what your current living expenses are and continuing them on in retirement. Do you want to travel in retirement? what kinds of hobbies will you be doing? How much will these cost?

After thinking about how much you need to spend each year, it’s our job as financial planners to project forward. We’ll see where you are currently headed and if it it’ll continue to meet your need. We’ll also see if your funds run out sooner than expected.

We factor in that your expenses will increase with annual inflation and your superannuation funds will still continue to grow through retirement even while you draw funds from it.

We have clients visit us with concerns that they may not be able to afford retirement and leave with the confidence to know what is very much achievable. An example might be that somebody who visits with no more than $100,000 of retirement savings. They only require $35,000 p.a. in retirement, but are happy to know they can achieve this by drawing slowly on their capital. While it earns above inflation, coupled with using funds from government age pension payments they didn’t know they could apply for.

What can I do to boost retirement savings?

Aside from how much you may or may not need, it’s important to ensure you are mindful of your superannuation and acting on this sooner than later. Making changes even 10 years before retirement can make monumental shifts in your superannuation capital. Obviously the younger you make these changes, the better the outcome in the long run.

Some general changes that can be made to ensure you are on track and are working towards a larger retirement nest egg can be:

1. Making added contributions on a regular basis

Your current employer is required to make contributions to your superannuation on a regular basis. For most, it is 9.50% of their salary. The reality is, they should be making more to ensure a healthy retirement balance. Making added contributions can make a big difference in the long run. Even something as simple as $20 a week can have results compounded over the next 20 years.

2. Have a look at the returns on your superannuation fund

Most superannuation funds provided to you often put your contributions into a ‘default fund’. This doesn’t always align with your time horizon or risk tolerance. These default funds are also designed to provide “safe” returns. These are the average performer and other funds that can be underperformers, and this may result in lower than expected returns that don’t build your capital as fast as you might think.

3. Seeing what fees are being charged to your superannuation fund

A lot of people are unaware of what fees are being charged on their superannuation. They are surprised when we bring up the providers’ website and flick through the product disclosure statement. They often find out their combined fees are higher than industry standards. These fees can be in the form of insurance premiums and older accounts with much higher administration costs. Some people are even unaware of high contribution costs, which are fees charged at your expense just to contribute to your superannuation. All these fees add up and can effect what you are earning on your superannuation investment.

4. Develop a relationship with a financial planner

This might seem like a push for business but you don’t actually need money to see a financial planner. Our job is to have a whole view of your entire financial situation. We have an ongoing relationship with you to ensure your superannuation capital, amongst other things, is performing well over the years. This means looking at the above points more carefully to ensure you are on track to meeting your retirement income needs.

In closing

I think overall, it is important to be proactive. The old adage of failing to plan is a plan to fail. For superannuation, this couldn’t be more correct. So, are you having thoughts about your retirement or concerned you may not have enough? Talk to your provider, see a financial planner, pull out the superannuation statements and see what you have. An hour of your time now could be the best investment you will ever make.


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