This seems to be the most frequently asked question for our financial planning team, other than how can I buy Bitcoin.
We could all do with a little more, and often want to know how much other people are earning and spending. Whether you are approaching retirement, or already there, knowing how much you have available to spend in retirement is important for a variety of reasons.
- Security of regular cashflow – the comfort of a predictable weekly wage is gone if you are a self funded retiree.
- Lumpy needs – often there can be some important big ticket items at the top of the list to tick off. Clear any remaining debts, an overseas/interstate holiday, perhaps buying a new car, caravan or boat. All of these important lifestyle things can put an upfront dent in your retirement finances
- Centrelink – knowing what you are entitled to, and what benefits you can potentially get. But its important to remember that the Government Age Pension is designed to provide the bare necessities for those most in need. If you have accumulated a bit in super, or have a second property, getting a part pension is the best you’ll be able to do.
- Budgeting – before you start rolling your eyes, a budget is not about stopping spending, its about understanding where the money goes. For most Australians, in retirement you generally have less money to spend each week that you earned whilst working. So understanding where your money goes is an important step towards a maintainable retirement income.
- Risk and Return – the more conservative your investments, the more predictable the cashflow is, however your money will run out sooner they also attract lower returns. On the other hand, the returns are higher from growth based investments such as shares, but the volatility of the share market does not sit comfortably for everyone either.
It is really about making sure you understand the types of investments you can make, the type of investments you should make, and the investments you should avoid. There are no get rich quick schemes, and plenty of scam out there for the unwary.
According to industry research, a basic or modest retirement income is $24,000 for singles and $35,000 for couples. This also fits in exactly with the Age Pension maximum rates.
A ‘comfortable’ retirement income of $44,000 for singles and $60,000 for couples is probably closer to the mark on what we’d like to be on.
For a home owning couple, $60,000 a year is enough to pay the bills and to put food on the table, eat out a couple of times a week, have a couple of little holidays each year, and of course spoil the grandchildren.
Around this amount seems to be a common result for many of our clients.
If you are wanting some international holidays, or enjoy a few more luxury brands when you go shopping, then probably closer to $100,000 a year is needed for couples.
The most important thing when it comes to your retirement income is to have a plan. And when we say plan, it is a personal and tailored retirement plan for you, not an off the shelf or DIY solution. The GNS team have the combined experience and understanding to guide you through retirement. Call our office on 03 9499 7444 and speak to a Financial Planner. Melbourne or Australia wide, we are just a call away.