Michal Bodi

Tuesday 3 September 2013

How much do I need to retire comfortably?

How much do I need to retire comfortably?

Question:
What would be the super amount/balance needed for a ‘comfortable’ retirement for couples when we reach our retirement age, which I understand is $56,406 in today’s dollars? My husband and I are 56 and 50 respectively, and have an SMSF with $600,000.

My answer:
Retirement planning is an ongoing, evolving process that requires plenty of foresight and I applaud you for thinking about it now. 

This is a common question that unfortunately cannot be answered based solely on the information you have provided. The answer will depend on many variables and your own expectations in regards to longevity of your money. 

Are you happy for your capital to run out at a particular age or you would prefer a perpetual income and the ability to pass your wealth on to the next generations? When do you wish to retire and what is your own idea of a comfortable retirement? 

The figures you have quoted as a comfortable retirement income are based on averages (ASFA Retirement Standard survey, June 2013) and they very rarely reflect reality. For example they only include $2,725 per year for an overseas holiday and they don’t allow for any extra cash for gifts to your grandkids...

Once you work out your own retirement budget you end up with a retirement income figure that reflects your own financial reality and you've completed the first step of many.

It’s important to realise that the retirement planning process is not a mathematical equation. It’s not just a matter of plugging the figures into a calculator. We live in a fast pace society that suggests it should be that simple. But even a simple calculation is only as good as the figures and assumptions used.

It is absolutely critical to realise that retirement income planning is way more complex and way more important to people than a single conversation. It requires expertise and the careful consideration of many factors. It requires wisdom – we know that a tomato is a fruit but we don’t put it in a fruit salad.




The next vital detail is to remember that every date and dollar specific retirement income plan (that also addresses ‘what if’ scenarios) requires a financial coach and their ongoing assistance to ensure you to stick to your plan. This is the only way of knowing whether you are on track with your retirement plans or not. And having this certainty is priceless.

I realise that the hardest thing for most people is the first step – to recognise and overcome the fear of experience and make an appointment to consult an expert. But it will take a lot of pressure off your shoulders. It can also mean the difference between getting it right and living the retirement you always wanted … and getting it all wrong.

by Michal Bodi

As published on FPA’s Ask an Expert website dedicated to promoting the value of financial advice - ttp://askanexpert.fpadifference.com.au/



Image courtesy of Michal Marcol / freedigitalphotos.net

No comments:

Post a Comment