Guide to Retirement Planning: How To Protect Your Financial Security

Retirement planning always starts before retirement.

Are you financially prepared for retirement?

From the minute we leave education to embark on our working lives we start to think about retirement. 

It might only be a distant thought in the back of our minds, but it will be there. 

What does the future look like to you? Do you know how to improve your financial well-being?

smiling man enjoying retirement

Retirement is in our thoughts more and more these days, with the increasingly aging population of Australia taking up time and space in both the news and political debates. 

People are increasingly worried about not having sufficient money to retire in comfort, or that the increasing retirement age has a detrimental effect on the well-being of the many older Australians who are making the transition from being a part of the workforce to fully retired.

As the age of retirement gets closer there’s little use in panicking about the changes which are inevitably approaching, instead, you should take these few simple steps which will help to get the situation under control and stop you from having to constantly stretch your household budget further.  

Below are a few simple steps designed to help you calculate the amount of money you may need for a comfortable retirement.

Whether you are on the right track to be able to meet those needs and to ensure that you have as much as possible when you finally say goodbye on the last day of your working life. 

Step #1 – Calculate how long until you retire

The first thing you need to work out is exactly how many more years of work you have left, and the number of years you may need to fund in retirement. 

This is a very simple equation, simply take your current age away from the age at which you will retire. You will then know exactly how many more years you will be at work.

You also need to determine how many years of retirement you will realistically have to finance. The number of years is loosely based on the age of life expectancy which can vary according to health etc. As a general rule, you should work on around 20 years.

This is an important consideration says Sydney PPC marketer Max Persyn. He explains, “With life expectancy increasing you can’t go off what worked in the past. You need to ensure the funds you have access to will last, especially as healthcare improves. Speaking to a professional financial services team can help you find the support you need to live a life of financial comfort. I highly recommend it.”

Step #2 – Calculate how much money you will need per annum in retirement

Working on the assumption that you will enter into retirement debt-free, you need to determine the amount of money you will need to live comfortably for the rest of your life. 

Figures from the Association of Superannuation Funds in Australia suggests that a single person who wishes to live comfortably during retirement will need around $816 weekly or $42,569 per annum. 

This increases to $58,444 per annum, which is $1121 per week for couples.

High earners may be used to a higher standard of living, so a good equation to work on is that they will need around two- thirds of their current income. Just as an example, a person who earns $100,000 per annum will need an income in the region of $67,000 per annum during retirement.

Step #3 – Think about savings and/or superannuation needed during retirement

Another simple equation, once you know how much money you need to earn each year of your retirement. 

All you have to do is multiply this amount by the number of retirement years expected in order to get to the total amount of money needed to achieve the goal.

If, for example, a person wanted $50,000 per annum to fund a 20-year retirement, multiply the $50,000 by 20 years which equates to $1 million.

retirement coins in jar

Step #4 – Consider the shortfall

Unfortunately many Australians will find that there is a significant gap between the amount of money they will need during their retirement and the amount which will actually be available to them. 

This difference is called the “retirement shortfall”. 

In order to work out the retirement shortfall in your case take a look at the amount of super which you have already figured out today. According to career coach Eiran Trethowan, “contributing to your super is one way to add to your retirement windfall and reduce your retirement shortfall. Keep in mind there are limitations to what you and your employer can contribute before further tax restrictions apply. So always speak to an expert first.”

How much more will need before you can retire?

You should also take into account any other debts and assets. 

Savings can make a difference for example. Maybe you have shares or equity in property other than your own home. 

What about credit card debts or loans which need to be paid off?

You need to take all financial factors into account in order to work out whether you are on track to reach your financial goals for retirement. 

Factoring in Age Pension and other variables which will give you a good idea about how much money will be available when you retire. These figures are based on predicted pension benefits and superannuation.

You can chat to the experienced team at Wealth Path to understand your financial needs and responsibilities in retirement – Contact the team here!

Step #5 – Work out a strategy which will help to overcome the shortfall

The sad reality is that many people in Australia end up extremely short of funds in their retirement. Often by hundreds of thousands.

That’s why you should follow all of the above steps. That way you’ll know just what you’re up against. And can work out a strategy which will help you to make up any shortfall in your retirement funds. 

There are several ways to deal with this problem. These include:

  • increasing regular contributions to superannuation
  • investing in high-interest savings
  • comparing accounts to ensure that you get the highest interest possible 

According to the small business team from Domain Metal Roofing, “you must also have a good debt reduction strategy to ensure that all loans are paid off before you stop working. It’s important to avoid falling into debt as you retire, with the added stress of loans and debt able to negatively impact your quality of life.” 

Selling off assets at retirement age is another good way to ensure financial security.

Some people find it difficult to discuss such things with professionals. So it’s a very good idea to speak with a financial expert or consultant who can give a clear indication of the actions needed to reduce any retirement shortfall.

Looking for advice and support? Speak to a Wealth Path expert today!


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