Are you on track for your retirement plan? In general, Australians save an average of $427 a month. The sooner you begin saving, the more opportunity there is for your money to grow.
How do you know if you’re on track to retire securely and safely? It’s smart to take the time every once in a while to take stock of your retirement savings, especially as you inch closer to your retirement years. According to the Australian Bureau of Statistics, the average retirement age for the past five years was 62.9 years old. Are you prepared?
If you’re like most professionals, you have a lot of questions about retirement. How much money do you need to retire in this day and age? What can you do every month to make sure your savings are on track? More importantly, are there any ways to supercharge the savings you already have? This guide will help you take a closer look at your own retirement plan to discover if you’re on track.
Retirement Benefits in Australia
First, let’s review the different retirement benefits available to retirees in Australia. The main benefit for retirees is the Age Pension. The Age Pension is Australia’s state pension system that is funded by general tax revenues. While the Age Pension pays $670.90 per single person and $505.70 each for couples per fortnight, this all relies on your income test.
The income test is a way to check your financial assets to see if you’re eligible for the full Age Pension. If you already receive any type of pension of over $172 per fortnight, your Age Pension will be reduced by 50 cents for each dollar over.
While the Age Pension is a great foundation for retirement, it isn’t usually enough on its own. Next, we’ll talk about just how much you should have saved in order to retire comfortably today. Costs of living are going up and it’s important to take a proactive approach to your savings.
The Cost of Your Retirement Plan Today
It’s more and more expensive to live comfortably in Australia today. This is why planning is key when preparing for retirement. You can always count on the cost of living going up in the future, so the more you can save, the better position you’ll be in for your golden years.
First, it’s important to recognise that women, on average, should have more retirement savings than men. This is simply because women are expected to live longer, and therefore will need their savings for longer. According to Finder, as of June 2014, couples should have $58,444 per year saved while individuals need $42,569 per year.
Now that you know how much you should plan for, you’re in a better position to check your own retirement plan in comparison. Don’t listen to the persistent myth that you’ll only need 70-80% of your current income. This myth doesn’t account for any hobbies, travel, or other retirement activities. Stick with the numbers above and add more if needed to support your current lifestyle.
Do the Math
You now know how much you should have as well as the government benefits available to you. It’s now possible to do some simple math to determine if you’re on track for your retirement plan. First, you need to estimate your expenses. In general, they’ll be near those numbers estimated above, but your unique situation might be different. It’s safe to assume your expenses won’t be too far off from where your current living expenses are today.
Next, add up your income. Include all of your sources of retirement income from the Age Pension to your employer or personal pension, if you have one. Subtract your expenses from this income to see where you are. If your income exceeds your projected expenses, you’re doing great. If not, you might need to make some adjustments to your monthly savings.
Don’t let a shortfall in your current status derail your retirement efforts. There is still hope that everything will be fine! Here are just a few ideas for making your money go further in your retirement plan:
- Downsize – Do you plan to downsize in retirement? Selling your current family home and choosing something smaller is a great way to free up monthly expenses and earn some income to put towards your savings.
- Retire Later – Many people are choosing to work longer, and it doesn’t have to be a drag. You can go part-time, start your own business, or invest in a side hustle.
- Save and Invest – If you’ve been saving already, you can always improve. Consider talking to a budgeting adviser about ways to save and invest more to make your money stretch even farther.
Retire with Confidence
Retirement doesn’t have to be intimidating. While many Australians are worried about rising costs of living, as long as you’re prepared you have nothing to worry about. There’s a lot to love about your golden years. It’s a time dedicated to focusing on you and what you love.
Whether you’re ahead of your goals or you need to pick up the pace, it’s always a smart idea to talk to a financial expert about your best choices when saving for retirement. Contact a specialist at Debt Busters today on 1300 368 322 to better equip yourself for the best years of your life.