If you’re lucky enough to love what you do, you won’t have to consider when to retire. But for most of us, George Foreman’s sentiments ring true : “The question isn’t at what age I want to retire, it’s at what income”.
Following the release of ABS figures in 2013, the implications of the ageing Australian population have received a great deal of press comment. In 2012, 14% of the population was aged 65 and over. This is anticipated to reach a whopping 20% and 6.8m people by 2040. With increasing life expectancy thanks to better healthcare, the population aged 85 and over is expected to triple in this same period to 4% .
This raises concerns about the pressure on government purse strings and the implications for optimal retirement ages, publicly funded pensions and the rules about when you can access your superannuation savings.
The pension age has been set to climb to 67 by 2023 but consideration is being given to raising it to 70 by 2035. The majority of people are still fit and able to work at this age.
In the light of this trend it is becoming increasingly important to fund your own retirement and possibly even aged care, even if this means you need to use equity in your own home. This of course affects the nest egg you hoped to leave for your children when die.
Retirement planning can’t start soon enough. If you wish to continue to live the lifestyle to which you have become accustomed during your working years you can not rely on the Aged Pension. “How much do I need to save before I can retire?” is a question we are so often asked. The AFSA Retirement Standard calculates how much you need to support a “modest” or “comfortable” lifestyle, advising that a couple, if they are homeowners, need an income of $58,000 to live a “comfortable” life. They define what is included in their calculations of a comfortable life, but a comfortable life to some may be a life in mysery to others and many people don’t envisage this figure as being sufficient.
It’s important to consider the lifestyle you wish to enjoy and outline a budget accordingly. Your accountant or financial planner can advise you on the sum required to be invested in order to achieve your desired income, taking into account potential investment returns and your adverseness to risk, and on the most tax effective tools to help reach your savings target. There are a number of rules around superannuation and self-managed super funds which come into play when you turn 55, so it is imperative that you seek advice before you reach this age.