With increasing expenses in daily necessities such as food, healthcare, and fuel, your retirement savings may need to extend further than planned. According to the Association of Superannuation Funds Australia (ASFA), a comfortable retirement standard has risen by 6.2% for couples and 6.7% for singles in the year leading to June 2022. But, there are steps pre-retirees can take to keep their retirement plans on track.
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Determine Your Actual Need
Guides and estimates provided by organisations for the amount of savings and income needed for retirement are just that, guides. It depends on your lifestyle expectations and various other factors, including where you’ll reside, sources of income, home ownership, and qualification for the Age Pension. By understanding your required income, you can reset your retirement plan and action steps leading up to it or ease your mind.
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Maximise Contribution Caps
As you approach retirement, ensure you make the most of your before-tax (concessional) and after-tax (non-concessional) super contribution caps. Before-tax contributions are taxed concessionally at a 15% rate, lower than your income tax rate (unless combined income and before-tax super contributions exceed $250,000, then it may be taxed at an additional 15% rate). After-tax contributions can also maximise your concessional cap, such as personal contributions or spouse contributions.
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Use a Bucket Approach to Investing
The bucket approach segments your investments into short, medium, and long-term buckets to maximise returns while maintaining diversification. This can include a cash bucket for short-term retirement expenses, a stable bucket with income-generating investments, and a growth bucket with higher-risk investments for long-term growth. The cash and stable buckets are replenished periodically from the growth bucket.
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Know Your Retirement Income Options
Most individuals spend up to 30 years in retirement, and the Super Guarantee ensures some level of super accumulation during your working life. Turning your super into an income stream, such as an account-based pension or annuity, provides a set level of income in retirement. But, there may be other sources of income available, including the Age Pension, investments outside of super, and savings.
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Reevaluate Your Retirement Date
Your retirement date may be set, but if you’re still finding satisfaction in working, pushing back your retirement date or transitioning to part-time work could be a possibility. It’s essential to reevaluate your retirement date and ensure it aligns with your goals and plans for a comfortable retirement.
In conclusion, taking control of your retirement plan by determining your actual need, maximising contribution caps, using a bucket approach to investing, understanding your retirement income options, and reevaluating your retirement date can help secure a comfortable retirement. If you need a hand with understanding your position please reach out to one of the IM team to book a call or meeting to investigate your situation further.
