It’s a well-known fact women tend to live longer than men, and we can expect to spend thirty plus years in retirement. So let’s deal with that and make sure our money doesn’t run out before we do.
Women typically earn less than men, and take more time off work caring for kids and parents and in laws, and as a consequence often have lower savings in superannuation.
So we need to be clever about this. We need to look carefully at our super and our strategies to make sure we have a fabulous time in retirement, while we are fit and able, and afford ourselves a lovely place to relax when we are ready to.
We spend so much of our lives looking after others, it’s time to take charge and look after ourselves.
“You can be gorgeous at thirty, charming at forty, and irresistible for the rest of your life.” – Mae West
Your retirement is your longest term goal, and it’s also your most important…
Probabilities show that while approximately 50% of males currently aged 65 will survive beyond age 84, 5% will survive beyond age 97. For females now aged 65, the equivalent survival probabilities applied beyond ages 88 and 100.
The good news is that we will enjoy a long and healthy retirement. The bad news is, we are going to have to pay our self for at least 25 years after we stop work. So the simple fact of the matter is, the sooner you start preparing for your retirement, the better off you’ll be.
Let’s make sure your super is all in one place, and that you are not paying too many fees, and that it is invested properly. Let’s work out how much more you need to save for a fabulous retirement. Because you’re worth it, and you deserve it, and why wouldn’t you?
I strongly encourage everyone to start planning for retirement from age 40. By salary sacrificing a small amount extra into your super every year, you will have the benefit of time and compounding interest to help you accumulate sufficient retirement savings.
That’s fine for 40 year olds.
The reality is there are a lot of people about to retire who have not had adequate time to prepare for retirement. Retirement for many people facing it sooner rather than later is a double edged sword. When you retire you have all the freedom in the world, but that’s not going to be much fun unless you have enough money (and good health of course) to enjoy it.
According to a new report by Deloitte1, Australians need to have a lump sum of at least $610,000 when they retire in order to have a comfortable retirement. If you’re already in your 50s or close to retiring, you’re likely a bit concerned by this news, but if you’re in your 30s or 40s, you still need a plan in place to get your retirement savings above the line.
According to the Association of Superannuation Funds of Australia (ASFA) a modest lifestyle in retirement is better than what you’ll get with the current Age Pension, but you’ll still only be able to afford basic activities2.
ASFA lists some activities3 you may be able to afford on a modest income:
- One or two short breaks near where you live
- Eating out infrequently, and cheaper food
- An older or less reliable car
- Cask wine
- Hair-cuts at a basic salon, or on pensioner special days
- Not much scope to run an air-conditioner
- No budget for home improvements
While if you have saved enough to afford a comfortable retirement, you’ll likely be able to afford:
- An annual holiday in Australia
- Eating out regularly with a good range and quality of food
- A reasonable car
- Bottled wine
- Regular hair-cuts at a good hairdresser
- A range of electronic equipment
- Replace kitchen and bathroom over 20 years
According to Deloitte and the ASFA, a modest income will deliver a weekly income of around $461, with 80% earmarked for essentials, including food, utilities, clothing, transport, health, and home maintenance; leaving little for leisure activities.
While if you’re to have a comfortable retirement, you’ll be drawing a weekly income of $833 per week, leaving over a quarter of these funds for leisure activities.
Work longer, or save more?
The key message is that even though the current Superannuation Guarantee amount is set to rise to 12% by 2025, unless you work longer or save more, you’re less likely to be able to afford a comfortable lifestyle when you retire. Let alone a fabulous one!
So how much more do you need to save? Research says that “males should contribute an extra 5.5%, and females 7.5% of salary in addition to the 12% Superannuation guarantee charge, throughout their working life, to self-finance a comfortable retirement,” and to avoid depending on a Government-financed Pension.
What is more alarming is only 15% of couples and 5% of singles currently have enough money in their super to fund a comfortable retirement. So if you don’t have a plan in place, you may be fooling yourself into a false sense of security.
According to the report, men will need a lump sum of $610,000 and women will need $680,000 to enjoy a comfortable retirement. That’s because we live longer.
So we need to plan to add a few hundred thousand more to make it a fabulous one!
1Adequacy and the Australian Superannuation System – Deloitte
2ASFA Retirement Standard March 2016
Source: Colonial First State Investments Limited