It is very common to get a blank look when a new client is asked how much they feel they will need in retirement. The reality is that the later people start thinking about this question, the more disappointing the outcome is likely to be.
While it may seem like a complex question, there are plenty of tools available to assist with planning but make sure you use them wisely and conservatively. A variety of calculators are available from the Australian Securities and Investments Commission (ASIC) via the following link:
When thinking about income needs in retirement there are a number of ways to approach it. One approach is to look at your current net pay and then take out expenses that will not exist when you are retired, but make sure you plan to own your home outright at retirement.
Once you have settled on an income figure for your retirement, you then need to think about a retirement date, your life expectancy (with an appropriate margin of error included as you may live longer than you think) and how much the lump sum goal needs to be to achieve your retirement income goal. The suite of calculators above from ASIC will assist with this projection.
From there it is a reasonable straight forward exercise to determine how much you need to save per month, from now until retirement, based on a reasonable level of investment risk and earnings (net of fees and a margin of error). Investment fees should be given special consideration as high fees can be very detrimental to retirement goals and the calculators above will assist with this projection also.
Hot Tip: The sooner you take a proactive approach to your retirement affairs, the more likely you will be to make your retirement a success. Don’t make the mistake in believing your employer superannuation contributions of 9.5% will ensure you a comfortable retirement as it most likely will not.
We do not agree to help everyone but if you feel you need a second opinion on your superannuation and financial position, contact The Financial Advice Shop to see if we can add value.
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