Avoid a retirement lifestyle crash

While you’re working, with money coming in, you can probably afford to live life the way you choose. But what will happen to your lifestyle when you retire?

When you’re used to a certain standard of living, it can be a shock if you can no longer afford to live that way. You would hate to have to cut back on life’s day-to-day pleasures, like a restaurant meal or weekend away. But that’s what can happen if you don’t prepare properly for retirement — so it’s important to plan ahead.

Here are three easy things you can do before you retire to help you keep the standard of living you enjoy today:

1. Work out how much you’ll need

It’s estimated that a couple needs about $57,665 a year in today’s dollars to retire comfortably[1]. But everyone’s situation is different. If you want to take regular overseas trips, buy a new car, renovate your home, or protect your health with private health insurance, you’ll need to factor in even more.

Then you’ll need to estimate how long your super needs to last, remembering that Australians, on average, are living longer than ever before.

2. Work out how much you’ll have

Once you’ve worked out how much you’ll need for retirement, it’s time to work out whether you’re likely to have enough. Consider your assets, including your super, home, shares or investment properties, as well as your liabilities, such as a mortgage or other debts.

A Financial Adviser can help you with this and set you up with a plan to save for retirement and get you on track.

3. Close the gap

If you’re on track – well done! But, if you’re like most Australians, you may find that there’s a gap between the retirement you want and the one you can afford.

Luckily, there are some simple strategies to help you close it. And the sooner you start putting them in place, the better your retirement lifestyle can be.

Ask your employer to put extra, regular contributions from your pre-tax salary into your super. Known as salary sacrificing, this can also have favourable consequences for your tax today, especially if you’re in a high tax bracket. Or contribute a lump sum, such as a tax refund or bonus, to give an extra boost to your super when you can.

Once you turn 55, you might want to consider a Transition to Retirement strategy. This involves drawing a pension from your super while you’re still working and salary sacrificing a larger slice of your income. You’ll pay a tax rate of just 15% on your contributions and boost your retirement savings inside super at the same time.

4. Ask the experts

To find out more ways to avoid a lifestyle crash in retirement, seek the advice of a qualified Financial Adviser.

Disclaimer

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.

Soundbridge Pty Ltd trading as, Soundbridge Financial Services are Authorised Representatives GWM Adviser Services Limited ABN 96 002 071 749, trading as MLC Financial Planning an Australian Financial Services Licensee, Registered office at 105 –153 Miller St North Sydney NSW 2060 and a member of the National Australia group of companies.

This information has been prepared by GWM Adviser Services Limited ABN 96 002 071 749 AFSL 230692, a National Australia Group Company, 105-153 Miller Street, North Sydney NSW 2060 Australia.

[1] AFSA (2014) ‘AFSA Retirement Standard’ http://www.superannuation.asn.au/resources/retirement-standard

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