How confident are you about your retirement?

Hardly a week goes by without the media raising questions about our preparedness for retirement. A lot of the media attention is driven off the back of research surveys and projects that appear to be the ‘flavour of the month’.

But then, with around a quarter of a million Australian baby-boomers hitting retirement age each year, I guess this is to be expected.

A recent survey conducted by Empirica Research on behalf of Australian Unity considered, amongst other things, the anticipated impact on retirement of:

  • Rising costs of living
  • Global (investment) market volatility
  • Government policy and changes to superannuation
  • A property crash
  • Australian share market volatility
  • Level of household debt
  • Low-interest rates.

In each case, the majority of respondents to the survey – split roughly 40:60 between pre-retirees and retirees – saw each of these as having a potential negative impact on retirement living.

Not surprisingly, the area of greatest concern is the cost of living. Rising energy costs have certainly been getting a lot of headlines in recent times.

Earlier this week a colleague relayed a story about his grandparents. They would sit around in the freezing cold of a southern winter and wouldn’t turn the heater on until 6:00 PM – such was their concern about energy costs.

74% of pre-retirees and 65% of retirees anticipate a negative impact on their retirement from rising living costs, according to the survey.

Changes to government policy were also seen as an area of concern for both pre and post retirees with changes to superannuation and social security being of prime importance.

Another observation from the survey was that around half of the responders are not investing in their future, apart from what they have in superannuation. For those that did hold investments outside of super, the most popular investments were Australian shares, residential property, and terms deposits.

After reading the report of the survey results, it got me thinking about the key steps we need to consider to ensure that our retirement is what we have always dreamed it should be.

Some of the points that came to mind include:

  1. Eliminate debt as early as possible – the number of people still carrying debt when they move into retirement is still surprising. Paying off a mortgage, car loan or credit cards while trying to live on a fixed income will make life very difficult indeed.
  2. Save more for retirement – if your only income in retirement will be the age pension, supplemented by the average superannuation balance for a typical retiree, don’t expect your retirement to be particularly ‘comfortable’. Making additional contributions to super, or investing outside of super will be the difference between a modest, and a comfortable retirement
  3. Swap your credit card for a debit card – that is, don’t spend what you don’t have. And spending on credit card to ‘collect frequent flyer points’ is a fallacy designed only to benefit the big banks.
  4. Live within your means – understand exactly how much it will cost to live your desired lifestyle – spend time preparing a realistic budget, and allow some extra to cover the unexpected bill or expense that might appear out of the blue. As I suggested in a previous blog, practice living on your retirement budget for a year before retiring!
  5. Retain some workplace involvement – even if just part-time. Not only does work provide income – which can slow the rate you draw down on your super, but for those on the government age pension, the ‘work bonus’ allows you to earn up to $250 per fortnight without it impacting on your age pension entitlement. That is an extra $13,000 for a couple each year! And don’t forget the physical and mental health benefits that arise from active workplace engagement.
  6. Embrace learning – not only is learning beneficial for mental health, but it allows us to develop new skills that we just might be able to apply for generating a little extra income along the way.

For many baby-boomers, retirement will last between 20 and 30 years. That is an awfully long time to be sitting on the porch reading a book.

Retirement takes serious planning, both in terms of the financial, and the lifestyle aspects. Don’t be one of the very many Australians who have not invested any time at all in planning for their retirement.

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