Make your retirement income last as long as you do…

Do you have enough to retire on? How much even is ‘enough’ to retire on? Will your retirement years be free of financial worries, or will you struggle to make ends meet? How can you ensure your ‘nest egg’ will last the distance?

Picture this: you’ve just retired from your last ever day of work, picked up your last paycheque, and suddenly the realisation hits you – all you have to rely on to fund your entire retirement, travel plans, emergencies and that new boat you want is your superannuation and savings. What if the money runs out too soon? How do you know if it’s enough to do the things you’ve been looking forward to, as well as buying the groceries and paying the bills? It’s hardly surprising that many retirees are more than a little nervous about their financial security when faced with this situation.

How much is enough?

It can be really hard to work out how much you’ll need to live on for your entire retirement, but to maintain the same standard of living you have had, you’ll probably need about 60 – 80 per cent of the annual income you earned before retirement.

When determining how much you need, you also have to consider:

• your (and your spouse’s) probable lifespan;
• the rate of investment return you can reasonably achieve;
• the rate of inflation;
• the type of lifestyle you’d like to maintain;
• the amount of tax you have to pay; and
• other sources of income.

What to invest in?

Interest bearing and capital guaranteed investments tend to be the most secure investments, such as cash or savings accounts, government bonds, savings bonds, and fixed-term trusts.

These types of conservative investments, despite being secure, often produce a return of roughly 2-6%, which may not be enough income to satisfy your needs when you invest your lump sum in them.

Higher, long-term returns and greater capital growth can be attained from investments such as shares or property, and shouldn’t be ignored. For producing regular income for day to day expenses, you can invest in tax-effective account-based pensions, unit trusts, and bank, building society or credit union accounts.

Making your money last longer

If you’ve done the maths and you don’t think you will be able to finance the lifestyle you’d like, and if continuing full-time employment isn’t an option, you’ll need to make your money last longer. How can you do this? Here are a few options:

1. Spend less – re-work your budget and look for ways to cut back your expenditure;
2. Pay less tax – your financial planner or accountant can help you pay as little tax as possible, and make sure you’re claiming all deductions you can;
3. establish whether you have any right to government & Centrelink entitlements;
4. Achieve better investment returns – monitor your investments (in conjunction with your financial planner) to tighten up your portfolio and produce better returns without increasing your risk; and
5. Supplement your income with part-time work – a few hours’ work each week could make a substantial difference to your budget and may not even affect your pension.

If you’ve just retired, or you’re approaching retirement, one of the best decisions you can make is to discuss your plans with a qualified financial adviser, who can help you make sure your retirement dreams become reality. Here at Wealtheon, we can help you become more aware of the importance of creating a secure financial future for your retirement.

For further information, contact Kris from Wealtheon Pty Ltd, authorised representative of Lifespan Financial Planning Pty Ltd AFSL 229892, on 1800 577 336 or email hello@wealtheon.com.au.

Have some questions? Want to know how it applies to you? Want a review of your personal situation? Click here to book a Free 15 Minute Discovery Session, give us a call on 1800 577 336, or email us at hello@wealtheon.com.au.