Retirement and Super

Remember Claire (our Financial Best Friend - FBF)? Well the good news is that Jen, her older friend retired this week. Jen is 65, but looks and acts like she is in her thirties and although some of her travel plans have had to be rethought, Jen is very much looking forward to being a lady of leisure. But this hasn't just happened, it’s taken some careful planning and consideration. Claire caught up with Jen and talked to her about the transition and some of the planning.

Claire:  What’s it like to wake up in the morning and think, no work?

Jen: To be honest, I haven’t really had a lot of time to think that. What with these crazy times, planning new domestic travel and spending time with the kids, life has been just as hectic as ever. There is so much on my list of things to do.

Claire: I am a little envious and I know it didn't just happen. How did you plan to stop working?

Jen: Ha, no need to be envious. To be honest it did take a bit of effort and planning. Like anything in life if 'you fail to plan, you plan to fail' and retirement is one of those life events that I needed to think about well ahead of time.

I probably started thinking about my own retirement 30 years ago and like most things, I could have started earlier.

Like many life choices, retirement age is a personal decision. Most people retire once they can access their super and/or the Age Pension. An early retiree under 55 years of age is not able to access superannuation or the Government Age Pension so another source of income is needed. To be eligible for the Age Pension you must be 66 years or older.

Claire: I’m so pleased we are having this conversation. I need to do more planning for my own retirement.

Jen: There is no ‘one solution’ and there are many things to consider. I did discover a couple of helpful tools and the Australian Taxation Office (ATO) has a useful website. The Money Smart site is also good. It has a superannuation calculator that helps you work out how much super you'll have when you retire and how fees affect your final super balance, along with this retirement planner. Another great retirement planning resource can be accessed here

Claire: How much do you need to retire?

Jen: Good question. It is very personal. In my planning I discovered working out how much is enough for retirement depends on many factors, such as your lifestyle, plans for the future, and the number of years you’ll spend retired. Additionally, estimating how much you’ll have when you plan to retire depends on factors such as your current salary, super balance and assets.

The ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years.

To support a ‘modest’ lifestyle in retirement, ASFA estimates that singles would need an income of around $28,220 p.a. and couples around $40,719 p.a.

A ‘modest’ retirement is considered to be more than the Government Age Pension but still having only limited travel, dining out and leisure activities.

Claire: What about a ‘comfortable’ retirement?

Jen: To achieve a ‘comfortable’ retirement, ASFA estimates that single retirees would need an income of around $44,183 p.a. and couples around $62,435 p.a.

A ‘comfortable’ retirement is defined as involving a broader range of leisure activities, regular eating out and occasional international travel.

Claire: Tell me about how you transitioned to retirement.

Jen: A great option when approaching retirement age is the ability to reduce your working hours and begin accessing some of your super via a transition to retirement (TTR) strategy. So, this meant I could access my super and keep working.

GuildPension helped me achieve my retirement goals and I only needed $10,000 to open either a Transition to Retirement (TTR), or an Account-Based Pension account. You can learn more about both these options here.

There are some great benefits from having a GuildPension. It gives me a range of investment strategies and options that suit my level of investment risk. It's easy to access my account and there are a choice of flexible payment options (subject to any Government restrictions). And, I can withdraw lump sums if I need to pay for a big event like a holiday or in an emergency.

Claire: Wow, you have given me a lot to think about when it comes to my own retirement and super.

But my key takeaway is that I need to do more planning and thinking about my future.

Jen: Planning is key. Contact GuildPension today on 1300 361 477 for any assistance.