retirement lifestyle
The retirement plans of many Australians have been seriously disrupted by the global financial crisis. People who had expected to call it a day have now found they simply don’t have enough money in their retirement kitty. A Transition to Retirement strategy may be a solution if you are in this situation. You may be able to ease into retirement, reducing working hours without reducing income.
The 4 cornerstones are pretty much the same, regardless of your age or life stage. You still need to balance and manage debt, investments, super and have an appropriate safety net in place. However, their relative priority evolves as your personal circumstances change. For example, getting set with the right retirement income stream structure and establishing an effective way to transfer assets to the next generation are likely to be higher priorities for you at this stage of your life.
You might stop working, but your money doesn't’t.
Did you know that your money keeps working for you after you retire? Most people expect that the majority of their investment earnings accumulate while they’re still in the workforce, but that’s not the case. For the average Australian, projections show that approximately 66%* of their eventual retirement benefit will come from investment returns after they stop working.
The fact that investment returns have a significant impact on retirement income is good news, particularly if you are expecting to rely heavily on the Age Pension for support in retirement. A recent study by Mercer* shows that only 6% of our total retirement income comes from contributions, investment returns earned before retirement account for 28% and a very significant 66% comes from investment returns earned in retirement. Don't underestimate the importance of getting the right investment strategy in retirement. Talk to an adviser and make sure your money is working for you.
* Projection assumptions: 9% contributions from age 21, 4% pa wage increases, with no career breaks, 7.5% pa net investment return pre-retirement, 6.5% pa net investment return post-retirement from age 67 retirement draw down, 60% of pre-retirement salary thereafter increased in line with inflation of 2.6% pa. Source: Securing Retirement Incomes, Mercer 2009
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