Navigating Your Retirement Journey - A Practical Guide

Embarking on the journey to retirement is a significant milestone filled with anticipation and complexity. At the heart of this journey is a clear understanding of your needs and goals, forming the foundation of a successful retirement plan. The guide below aims to demystify the process with pragmatic steps, which may assist to make it less overwhelming and help put a robust financial foundation in place for retirement.

Understanding your expenses and future lifestyle

While predicting future expenses in retirement isn’t an exact science, a practical starting point is to analyse your current spending patterns. Factor in your everyday living expenses as a baseline and add a buffer for factors like supporting children or aged care and those extra retirement indulgences – whether that’s globe-trotting, spoiling grandchildren, or simply enjoying your hobby.

The Australian Superannuation Funds Association (ASFA) offers valuable insights, serving as a crucial resource in your retirement planning. For instance, ASFA’s research indicates that a homeowner over 65 will require an annual income of $71,723.56 for couples and $50,981.27 for singles for a ‘comfortable’ retirement.

AFSA’s figures and measure of ‘comfort’ account for daily necessities such as utilities, social activities, local travel, and factors like an international trip every seven years. However, ‘comfort’ is subjective, and defining what it means to you is crucial in working with your adviser to craft a personalised retirement plan.

Tracking your path to retirement

Tracking your journey towards retirement is crucial, and your adviser can help you build periodic reviews into your plan to track your progress and, if required, alter your plan. According to ASFA, to reach this ‘comfortable’ retirement, you should aim to have reached retirement savings by age 67 of $690,000* for a couple and $595,000* for singles.

*Please note, this assumes that all capital will be drawn down, and a part Age Pension will be received by the retiree/s. AFSA have also assumed a 6 per cent investment earning rate and a 2.75% deflator to convert the numbers into ‘today’s’ dollar value.

Start Now to Maximise Your Retirement Savings

The key to enhancing your retirement comfort level lies in taking proactive steps towards saving and getting started. For most people, the earlier, the better. The impact of compounding can transform the balance of your retirement fund. Consider the case of a 47-year-old beginning with a $150,000 savings balance, who invests $500 a month. If they get a 7.5% return over 20 years, they can amass around $897,000 by age 67. In comparison, if they delayed starting by 5 years, they would need to nearly triple their monthly contribution to $1,450 to reach the level of retirement savings by that age.

Source: MoneySmart

While the case study above demonstrates the power of getting started, it’s essential to understand that factors like investment returns, taxes, and personal circumstances can also play a significant role.

Retirement Planning Advice

At Evans and Partners, we appreciate the complexities of retirement planning and whether you’re embarking on your retirement journey early or are in the later stages of preparing for retirement, we understand the nuances. Our experienced advisers can guide on how to get started, develop a plan and keep you on track.