Thinking about retirement?
With retirement on the horizon, you may be asking yourself a number of questions, such as:
-
How much can I spend in retirement?
-
How long will my super last?
-
What can I do to improve my retirement lifestyle?
-
What is the best mix of assets to make my money last longer?
Before you can answer these questions, you need to work out how much you have to retire on and how long those funds might last. That’s why we’ve created My retirement simulator.
It asks a series of simple questions to give you an indication of your modelled position at retirement and an illustration of how long your retirement funds might last.
How much can I spend in retirement?
According to calculations from the Investment and Financial Services Association (IFSA), most Australians will need approximately 65% of their pre-retirement income to maintain their current lifestyle in retirement.
This means that if you’re currently earning $70,000 a year, it’s estimated that you’ll need approximately $45,500 a year to maintain your current lifestyle in retirement.
How long will my super last?
If you’re not sure how much you’ll be able to spend in retirement, the first step is to work out how long your existing superannuation savings are likely to last. This is a combination of how much you want to spend in retirement and your life expectancy.
If you’re planning to retire at age 65, the research suggests that you’re likely to live for another 20 years. The average Australian woman at age 65 has a life expectancy of about 86 years and the figure for Australian men is about 83 years*.
*Based on 2003–2005 Life Expectancy tables, ABS Feb 2007
What can I do to improve my retirement lifestyle?
There are a number of simple things that you can do to improve your retirement and some more complex strategies that you can implement with the help of an AMP Financial Planner.
Firstly, there’s your retirement age. Who says you have to retire at age 65? You might like to retire a little later or earlier.
Then there’s your annual income in retirement. Reducing the amount of income you require in retirement just slightly can have a big impact on how long your funds can last. Generally speaking, the more income you draw each year, the faster your money will run out.
And, if you’re still working, you could consider what you put into your super – your contributions. Even just a little extra now could make a big difference at retirement.
A building for retirement strategy (or transition to retirement strategy) may help achieve your goals. This strategy involves paying all or some of your salary into super and replacing it with a more tax-effective income from an allocated pension.
This is a more complex strategy that will generally require professional financial advice.
For further information on how this strategy might work click here [insert link to strategy 6 in the super micro site.
What is the best mix of assets to make my money last longer?
You can also look at how you structure your assets. As a general rule, Centrelink treats assets held inside and outside of super differently, so you might like to investigate the effect of changing the amount of assets you hold outside of super. Restructuring your assets may impact the amount of Centrelink benefits you receive and the amount of tax that you pay.
You might also want to think about how your funds are invested. It obviously depends on how comfortable you are with risk, but the general rule is more aggressive mixes come with the potential for greater returns – but the risk of lower returns is higher. An AMP financial planner can help you decide on the most appropriate asset mix for your personal circumstances.