Retirement, superannuation, pensions and tax can appear a bit daunting when you are young and many people put off planning for the future because it can all seem a bit too confusing.
If you are thinking you might have around 10 years left of your working life, then there are some steps you can take now to get your retirement savings on track.
There are three main questions to ask before you begin:
- How much money will you need in retirement?
- How much are you prepared to contribute now?
- How long are you prepared to keep working?
Once you have given some consideration to the major questions, you can start thinking about the details.
How long will retirement last?
Many people expect they will be living into their 80s and if you retire at 65 and live to 85, that’s 20 years you have to support yourself without earning an income from employment.
At the moment, you might qualify for the government age pension if you are 65½ or older depending on your circumstances including whether you're a member of a couple, what assets you own, how much income you still earn and whether you are living in Australia.
But this age requirement has been increasing since 1 July 2017 and by 1 July 2023, the starting age will be 67 years.
The amount that the age pension provides might not be enough to support the lifestyle you would like, so superannuation savings and investments might be the way to manage to do more.
The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard has researched some benchmark annual budgets that might give you some idea of what you could need for a ‘comfortable’ or ‘modest’ retirement lifestyle.
What will retirement look like?
When you are not working, you might have plans to travel, take up hobbies, or spend more time with family and friends.
There’s a number of things to consider as you head towards retirement, including:
- Where you want to live
- How much travelling you want to do
- What your day-to-day activities might be
What about expenses?
You might like to think about what your expenses would be when you stop working, and consider the following possibilities:
- Will you have any debts or mortgage to pay off?
- Will you need to pay rent where you decide to live?
- What health considerations do you have?
- Are there likely to be ongoing costs for any medical conditions?
- Do you want to leave an inheritance?
The sooner you can start planning for what you want and how you would like to live then the sooner you can put some saving and investing strategies in place.