Most people aspire to have a comfortable retirement, but with the rising cost of living and longer life expectancies, this can be difficult to achieve. There is so much noise about inflation, rising interest rates, and share market volatility. So, where should you start?
In part one of this two-part article, we discuss tips you can consider to retire comfortably in Australia. As always, we recommend that you do your own research and seek professional advice before proceeding.
How Much Does a Person Need to Retire Comfortably in Australia
The Association of Superannuation Funds of Australia (ASFA) estimates that a comfortable retirement for a couple now costs around $640,000 a year, while a single person needs $545,000 in retirement savings. Of course, everyone’s definition of “comfortable” will be different, but ASFA’s definition includes being able to afford regular leisure and recreational activities and occasional luxuries.
It is important to note that these figures are only estimates, and your actual costs in retirement will depend on several factors, including your lifestyle, health, where you live and how long you live.
10 Tips for a Better Retirement at Any Age in Australia
Here are the first five of our ten tips that can help you achieve a better retirement, at any age:
1. Start saving early
The sooner you start saving for retirement, the better off you should be. The power of compounding interest means that the earlier you start saving, the more time your money has to grow. For example, if you start saving $200 per month at age 25, you will have $96,000 saved by the time you reach retirement age (assuming an annual return of 6%). However, if you wait until age 35 to start saving, you will only have $56,000 saved by retirement age – even though you are saving the same amount each month.
2. Make the Most of Your Superannuation
Superannuation is a tax-effective way to save for retirement. The money you contribute to super is taxed at 15% which is usually a lower rate than your income tax rate, and the earnings on your super are taxed at a lower rate than most other personal investments. You can boost your super by making regular after-tax contributions or salary sacrificing.
3. Consider Salary Sacrificing
Salary sacrificing can be a great way to boost your super. It involves agreeing with your employer to sacrifice part of your salary (before tax) and have it paid into your super fund. The benefit of salary sacrificing is that the amount you sacrifice is taxed at a lower rate than your marginal tax rate. Plus, you only pay income tax on your reduced salary, but you receive the reduced salary plus the benefits.
4. Make Voluntary Contributions
In addition to salary sacrificing, you can also make voluntary contributions to your super from your after-tax income (money that has already been taxed). The earnings on your investment will be taxed at a maximum rate of 15% and are tax-free in retirement phase.
Plus, if you earn equal to or less than $42,016 in the 2022/23 financial year, you may be eligible for a government super co-contribution.
5. Use a Transition to Retirement Strategy
If you are over the age of 55, you can use a transition to retirement (TTR) strategy to boost your retirement savings. A TTR strategy allows you to access your super while still working, which can be used to supplement your income and/or reduce your working hours.
You Only Retire Once – Make Sure You Do It Right!
There are a few key steps that can help you to retire comfortably in Australia, no matter what age you are. Firstly, it’s important to have a clear goal and plan for retirement. Secondly, the best time to start planning for retirement is today! Finally, it’s important to have a good support system in place to keep you on track, whether that be your partner, family, or your financial adviser.
By following these steps, Australians can have a retirement that is both comfortable and enjoyable.
Are you ready to get financial advice on the Central Coast today? Central Coast Financial Planning Group has a team of professional financial advisers who can guide you through complex matters and navigate the ever-evolving retirement maze! Call us or book online to secure your complimentary first meeting with our advice team today!
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.