Retirement Planning: Nearly 1 in 2 Australians Wing It
Unplanned retirement is like taking a gamble when all the odds against winning are stacked really high. Yet close on one out of every two Australian pre-retirees are doing just that. And one in three of those who’ve already retired, are wishing they had planned more carefully, according to TLK aged estate planning specialist Thomas Mousa.
Citing the HSBC Future of Retirement survey, and the research findings released in the Retirement Savings Gap report, Mousa says Australia’s workforce have found themselves caught between a misguided belief that Superannuation alone would provide them with a comfortable retirement and the impact of monthly must-pays on their hard-earned cash.
Pre-retirees Flying With a Broken Wing
“Working Australians are faced with large debts, and with unpredictable pay rises which are slow to arrive and low when they do. This is forcing workers to adopt a ‘pay today’s bills and worry about the future tomorrow’ attitude. And left them winging it when it comes to long-term retirement planning,” Mousa said.
“And they’re dealing with a Superannuation programme they see as their retirement saviour. But although the super is one of the best in the world, on its own it won’t cover more than 10 years of comfortable retirement even with a reasonable balance. Australians have to themselves contribute substantial amounts to their super account, or find another way of bolstering the coffers.”
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Statistics show the average Australian household deals with debt of around $250,000. And that is not because they are wasting money on trivialities. Most involve good debt, like mortgages on homes, or investment in rental properties. Both bring long-term returns, either in rental income or by saving on the costs of rent. Bad debt accounts for the remaining 8% (or around $20,000) of the average Australian household debt. It gives nothing back and continues to take until the debt is fully paid. Meanwhile, the interest on the purchases and loans quietly reduces income.
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The Importance of Planning
Mousa says the importance of retirement planning should be put right up there with the monthly bills and debit orders on the priority list. And the earlier this is done, the better. Ageing is the only inevitability in a future riddled with uncertainties and unknowns, including how long retirement (and the money to fund it) will last in an ever-fluctuating economy with roller-coasting inflation rates and investment returns. And the increasing difficulty retirees may face when trying to boost the super and/or age pension once they have retired, either because of the shortage of job opportunities for seniors or as a result of failing health.
Setting the Plan in Motion
Those retirement plans that are the most likely to work, originate with a clear idea of the pre-retirees’ current financial health, and what kind of retirement they want. With these in mind, the planning involves using those numbers that can be calculated and determining how to balance them with the largest possible number of years post-retirement. If the forecast is for too few years, or the financial needs are underestimated, the whole pack of cards could come tumbling down.
Achieving the optimal outcome can be manipulated by extending the retirement age, using the superannuation balance to buy a lifelong pension, or adding to it with other income streams, or new investments. But the primary aim when planning, should be to consolidate both debt and investments so as to get rid of the first and gain the most from the second. Cutting back on expenses and setting a savings target (and keeping to it) follow closely on their heels.
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Turn to the experts, like TLK Partners in Kingsgrove, NSW, for advice on investment options and savings plans. They can assist in extending superannuation while ensuring you are not snared in the nets of scams or get-rich schemes which have the same chance of success as the gamble on heading for retirement without a plan.
TLK Partners Wealth Management Companies Kingsgrove, Beverly Hills | Tax Accountant & Agent | Property Adviser are financial management, retirement planning and wealth advisers serving enterprises and private individuals who hope to take care of their future through sound financial management. Visit their website or contact them at (02) 8090 4324 for an appointment to discuss your financial management and investment needs.
This material is of a general nature only, it does not take into consideration your financial circumstances, needs or objectives. Before making any decision based on this content, you should assess your own circumstances, seek professional advice or contact our office to be directed to the appropriate professional. Whilst all care has been taken in presenting the material neither TLK Partners or its associated entities guarantee that the material is free of error and, the information may have changed since being published.
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