Retirement Planning
Planning your retirement as early as possible will allow us to implement the right road map based on your personal requirements.
We will structure your assets correctly based on current legislation and give you a clear understanding of our advice. We understand these are the most important years of your life and we are right here by your side;
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Methodically determining your tolerance to risk and investment requirements
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Spending the time educating you on why your assets are invested the way they are
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Structuring your assets correctly to achieve your desired income in retirement in a tax effective manner
There are many things to consider when planning for retirement, but the biggest question of all is 'can I afford to retire?' Your spending habits will influence how much money you need to accumulate in preparation for retirement.
Retirement lifestyle
When planning for your retirement, the first step is to think about your desired retirement lifestyle, and how you will secure the cash flow to fund it.
Your budget should include:
- Needs: Rent, mortgage payments, strata and/or council fees and levies, food, clothing, bills and health expenses
- Wants: Holidays, meals out, entertainment, gifts
- A 'rainy day' fund: A modest lump sum to have on hand for unforeseen costs such as car, home repairs or new appliances
- Savings and estate planning: Putting money aside to provide for family and/or friends
- Anything else that may be relevant to your circumstances
Living longer
Unless living longer runs in the family, most people tend to underestimate just how long they'll live.
Many Australians are living longer due to improvements in medical care and living standards. The average life expectancy has risen substantially in recent years and continues to increase, particularly for people over the age of 65.
If you're 65 today, there's a good chance you'll live well into your 90s.
To have confidence your money will last the distance you will need a substantial amount of savings. Retirement can be more expensive than you think.
The Age Pension can provide you with some income, but it probably won't be enough to support your desired lifestyle. You will need to consider investment solutions that can provide you with an income for the rest of your life.
Living a long time means there's a good chance that your cost of living (and the purchasing power of your savings) will be affected by inflation over the long term.
Impact of inflation
Since it's likely that your retirement will last 20 years or more (assuming you retire at 65 or younger), there's a good chance that your retirement will be affected by inflation.
Example:
With an inflation rate of 2.5% per annum, the purchasing power of a dollar is almost halved over 25 years. At that rate of inflation, a loaf of bread that costs $3.00 today1, would cost $5.56 in 25 years.
Over time, inflation can erode the value of the income you receive from your investments in retirement, making it more difficult to maintain your desired standard of living.
Since your money will typically be invested over the long term in preparation for your retirement, if you are invested directly or indirectly in shares (e.g. via a managed fund) you will also usually face movements in markets which can impact your investment balance and therefore your income during your retirement.
Footnote
1. Australian Bureau of Statistics, Average Retail Prices of Selected Items, Eight Capital Cities, June 2011.