YourLifeChoices has been championing the cause of Australian retirees for 15 years, yet we still observe many people experiencing ongoing confusion and disempowerment as they plan their retirement – or try to make ends meet after they have left full-time work.
Why is this so?
It’s down to a few reasons, but the most common ones we hear are:
- Australia’s retirement income system is unnecessarily complex
- it is skewed to reward those with the most money and to punish those with the least
- most of our members (of whom 86 per cent are aged between 50 and 75) consider themselves underfunded for a comfortable retirement
- our members are also concerned that they may not have sufficient savings to even support a modest retirement lifestyle
- should our members suffer from unexpected ill health, they will struggle to cover their bills.
If you, too, are in this situation, here are some useful strategies to help you improve on your retirement bottom line.
Many Australians seem to think of retirement in the same way they think of New Zealand – a great place to visit, but there’s no real urgency; it’ll always be there.
Yes, retirement will be on your horizon in the foreseeable future, but failing to plan early for retirement income damages your prospects for a reasonable post-work lifestyle. And failing to understand your ‘key markers’ is also likely to limit your potential nest egg.
Your key markers are:
- likely longevity (try this five-minute quiz)
- current savings (superannuation, private savings, assets apart from the family home).
These numbers can be fed into a very basic ASIC MoneySmart calculator to help you understand the first piece of important information – whether or not you will qualify for an Age Pension. And if you do qualify, whether it will be a full or part pension.
Understand your entitlements
So now you have a sense of the level of income you are likely to receive in the form of a full, part or no Age Pension. But this is only part of the picture when it comes to your entitlements. Concession cards, Pension Supplement and Seniors Supplement are just some of the ‘perks’ that can make funding your retirement a little more affordable.
By now, after reviewing your likely lifespan and your savings, you may learn that you will run out of money about 10 years too soon. If you’re still working, this exercise is likely to be a wakeup call for putting more money into your superannuation. And if you are trying to get more ‘bang for your buck’, you may be interested in recent research that reveals industry super funds remain the best value for retirement savings.
Older workers can use two top-level strategies to boost their retirement nest eggs. These are salary sacrifice and Transition to Retirement pensions (TTRs). Before embarking on either strategy, you should always seek independent financial advice.
Where you live contributes to your mental wellbeing – particularly when you enter retirement and want to have family, friends, trusted medical practitioners and long-standing community support nearby. So, to downsize for the sake of it and end up in something that resembles the size of a dog box on the 21st floor, pining for your beloved garden, makes no sense at all. But there are many other ways to ‘skin’ the downsizing cat.
At first glance, the sale of your home to downsize may make sense, but you need to factor in many expenses – which can amount to tens of thousands of dollars – as well as the stress of the whole selling-and-buying process.
An equity release product, such as a reverse mortgage or homesafe scheme, may suit you better.
And if you don’t have the desire to sell part of your home to a bank or lending institution, why not consider taking in a boarder? Or you could let spare rooms – ones that are often no more than a shrine to adult children who moved out more than 15 years ago – on a service such as Airbnb.
Above all, educate yourself
Over the past 30 years there has been a slow but steady shift of the risk of retirement income from national governments to individuals. You are actually on your own now. Yes, the Age Pension provides a safety net, but with legislation lurking that could raise the Age Pension eligibility age to 70, many years of self-funding may be ahead of you. Act now to ensure that you are fully aware of how our retirement system works, and work out what you can do to ensure you receive maximum value for your years of hard work.