How to set super goals that actually get you somewhere
Setting goals for your retirement is a great starting point to set you on the right path for how you aim to live the later years of your life.
Following here are a few suggestions to help your planning. And keep in mind that it’s not all about money – super and retirement planning works best when you have a sound, whole of life balance.
Think about when you want to retire – Any number of factors might come into play when determining the right time for you to retire, like when you can access your super, your financial or family commitments and your employment arrangements.
Will you ease into retirement by reducing your hours? If you’re thinking of easing into retirement, taking out a Transition to Retirement pension allows you to reduce your working hours and supplement your income by drawing on your super through an income stream while you’re still employed.
Consider the retirement lifestyle you want – Think about all the things you plan to do, such as travel, volunteer work, spending time with family and friends, looking after your grandchildren or pursuing your hobbies. You should also consider where you’ll live, what car you’ll drive, your health and what you’ll do for entertainment.
How much will you need? Most people have an idea of how much money they currently spend. But few are clear on how much money they will need each year in retirement. Check the Association of Superannuation Funds of Australia (ASFA) Retirement Study for guidelines on how to measure this.
How long will your money need to last? If you’re a 50-year-old male, your life expectancy is around 82 years. You can determine your average life expectancy based on your gender and current age using various online calculators. Equip’s retirement income calculator allows you to adjust contributions, investments, expected retirement age and other variables to see how these changes can impact your retirement.
Are you on track? Once you’ve worked out how much you need each year and how long this needs to last you can work out if you’re on track to fund the retirement you want. You may also have other assets that contribute to your retirement savings: a share portfolio, your home or an investment property, or perhaps savings in the bank. These all contribute to the pool of assets you can draw on to fund your retirement.
Will you need a lump sum payment or a regular income stream? Consider whether you’ll be able to manage with a regular income through a pension product or whether you’ll need a lump sum amount to pay off your mortgage, or a combination of both.
Equip’s head of financial planning, Camille Giles, says her team generally recommends receiving your super benefit as a regular income payment.
“People are used to receiving a regular income and are accustomed to managing their household budget within it.
“One of the difficulties people have drawing a lump sum is knowing just how long it will last; how much their short-term spending will impact on whether their money runs out or not .
“Using an off-the-shelf type income product like Equip MyPension, or setting themselves up with other products under the guidance of a professional planner is a better option for most people,” she said.
Stay healthy, involved and active – At a personal level, keeping healthy and active in your social and family networks and local community, as well as mentally stimulated will all provide huge benefits to your overall wellbeing.
Seek effective advice – To ensure you’re in the best possible financial position, consider consulting a professional such as an accountant or financial planner.
Know your limits – If you’re not an expert investor, it’s probably best to take a conservative approach by putting your super into a reliable retirement income product to ensure your savings are protected.
Camille says this does not necessarily mean loading up your investment portfolio with conservative investments like cash and fixed interest.
“Increasing life expectancies for retirees in good health means a portfolio should have a proportion of growth investments like quality shares and perhaps property, to make pension products last longer.
“Of course, when you make your investment choices, you have to be able to sleep at night, so the investments that are primarily about setting something up that gives you peace of mind as well as being a good financial strategy,” she says.
Related links:
10 superannuation tips for 2015
How much is enough money to retire on?
Six retirement books everyone should read