The world is changing and retirement is changing with it.
A recent global survey conducted by HSBC (The Future of Retirement Shifting Sands 2017 by HSBC Holdings plc) has found that overall, around two-thirds of working age people are concerned about declining state pensions/social provision and the growing number of older people requiring retirement funding/support, also believing that levels of national debt mean there will be less support for the elderly.
Almost a quarter of working age people believe government pensions will no longer exist when they come to retire, and unsurprisingly this view is more common among Millennials than Baby Boomers.
Only 21% of working age Australians believe they will be financially comfortable in retirement. Of those surveyed:
- 58% believe they will have to work longer and continue working to some extent in retirement;
- 75% were willing to defer retirement for two years in order to have a better retirement; and
- 65% are concerned about declining state pensions, like the Australian age pension, because of mounting national debt and an ageing population.
The report goes on to set out some practical steps when planning for retirement. While these are more directed towards the Millennials, to an extent, they apply to all generations:
- Be realistic – start saving earlier, and save more;
- Consider different sources of funding – balance savings to spread risks and maximise returns;
- Plan for the unexpected – include worst case scenarios when planning;
- Embrace new technology – use online planning tools, and seek professional advice.
Looking at retirement planning, ASFA, the Association of Superannuation Funds of Australia, have recently released their March 2017 Quarter Retirement Standard figures, setting out the amount required to live a modest and a comfortable retirement lifestyle.
These figures reveal that the costs of a modest retirement for both singles and couples have risen by around a third in the past decade. Between June 2006 and March 2017, the ASFA standard for a modest retirement increased 33% for a single person and 36% for a couple, whilst the cost of a comfortable retirement rose by 23% for a single person and 26% for a couple.
During the same period, electricity costs jumped by 124%, health costs 60%, property rates and charges 83%, and food rose by 24%, meanwhile costs for clothing fell by 3% and telephone and mobile phone charges fell by 8%.
The March 2017 Quarter Retirement Standard budgets are:
In addition to seeking some really good financial advice from a financial planner, some useful pre-retirement suggestions include:
- Understand exactly how much it will cost you to live in retirement
- prepare a realistic budget, and account for emergency contingencies.
- Consider deferring retirement – even if it means continuing to work on a part-time basis for a while.
- Understand all the government benefits you are entitled to.
It is important to work out a realistic budget for your intended retirement lifestyle, remembering that many things will actually cost more than expected.
It is also a great idea to consider practising living on your retirement budget before you actually retire.
If you are heading towards retirement, give your ‘retirement budget’ a trial run for a year. If you find that you cannot live on your planned budget, then you can either rethink your budget, rethink your planned retirement date, or assess the feasibility of continuing to do some paid work in retirement, to stretch those retirement dollars.
As was highlighted in the HSBC report, starting to save earlier, and saving more, will be the secret to being best placed to enjoy the type of retirement you have always dreamed of.
Contact Financial Planning
To book a no obligation appointment with our experienced financial planner please call (03) 6344 3899 or send us a message online.
These articles are of a general nature only and are not to be taken as recommendations as they might be unsuited to your specific circumstances. The contents herein do not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions.
InterPrac FP directors and advisers may have investments in any of the products discussed or may earn commissions if InterPrac clients invest or utilise and any services featured. Your InterPrac FP adviser or other professional advisers should be consulted prior to acting on this information. This disclaimer is intended to exclude any liability for loss as a result of acting on the information or opinions expressed.