Retirement is not that simple!

Most people dream of the stress-free and simple life that retirement brings, however just how stress-free and simple will retirement be.

For most of us, by the time we retire, we would have dealt with all the stress, the high blood pressure and emotions that one would normally face over a period of 40 plus working years.  Regardless of the type of work you have performed – whether you were self-employed, a professional, a public servant, tradesperson, or a labourer – without a doubt you would have been confronted with many decisions and challenges work brings.

This level of work stress is compounded further by the ongoing issues of family life.

From having children and riding the bumps through the different stages of their lives to saving for a deposit to buy a home.

After you have survived this period of your life, retirement should be easy and certainly stress-free. You own your home and the last of the children have moved out and there is no longer a drain on your bank balance.

Life should now be simple…

Not quite as now you have a new set of things to worry about, like Do I have enough superannuation to keep me in the lifestyle I would like to achieve in retirement? Do I qualify for the age pension or the Commonwealth Seniors Health Card? What happens if I am not able to look after myself? Will I be able to afford care and the necessary medical assistance?

So what can a person do to try and reduce the level of stress in retirement?

A financial expert or adviser will understand the legislation and how much you will need in your retirement.  They can educate you not only during retirement but more importantly, they can help you take the correct steps before you reach retirement age.

 

Source:  Mark Teale | Centrepoint Alliance

Are you adjusting your retirement expectations?

A recent global survey conducted by HSBC[1]  found that only 21% of working age Australians believe they will be financially comfortable in retirement!

In fact, the report suggests, 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
  • 65% are concerned about declining state pensions, like the Australian Age Pension because of mounting national debt and an ageing population.

This report paints a rather bleak picture of the future, not only for the baby-boomer generation, but also for Generation X (1966 – 1979), and Millennials (1980 – 1997).

The report sets out some practical steps when planning for retirement. While these are more directed towards the Millennials, I believe 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.

While on the topic of retirement planning, the Association of Superannuation Funds of Australia has just released its March 2017 Quarter Retirement Standard figures.

The March 2017 figures show a small increase in costs over the previous quarter’s figures. The factors that led to the most recent increases included petrol, medical services and electricity. Offsetting that were savings in international travel and accommodation, and fruit, with a small fall in clothing and footwear reflecting discounting during the post-Christmas sales.

The Retirement Standard budgets for March 2017 are:

Couple Single Female
Comfortable Modest Comfortable Modest
Weekly $1,150.13 $668.45 $837.41 $465.07
Annual $59,971 $34,855 $43,665 $24,250

So, my tips for those who are considering retirement in the foreseeable future;

  1. Consider deferring retirement if possible – even if it means continuing to work on a part-time basis for a while
  2. Understand exactly how much it will cost you to live in retirement – prepare a realistic budget, and account for contingencies (like new hot water system, or roof repairs)
  3. Know what government benefits you are entitled to
  4. Seek some really good financial advice from a financial planner experienced in retirement advice

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.

 [1] Reproduced with permission from The Future of Retirement Shifting sands, published in 2017 by HSBC Holdings plc.

 

Source:  Peter Kelly | Centrepoint Alliance

Your Home – how attached are you?

I am going to look at home ownership from an older generational point of view.

For the majority of age pensioners, their home is the largest asset they own and in most situations the most expensive asset. The costs associated with owning a home are not minor, from council rates which can be quite high depending on where you live through to water rates, the ongoing maintenance and of course the yearly home insurance premium.

For a single age pensioner, with very little other income outside a full pension, these costs can prove quite high, but in all my years of talking to retirees, suggesting a person sell their home and downsize is normally met with a scowl and that this is not an option.
Why is it not an option?

For a large number of people, the house they currently live in has been their home for a lengthy period of time. It is where they have raised their children, it contains special memories or it could be the last place they lived with their spouse who has since passed away. Like their neighbours, they feel secure, they are comfortable with the task of travelling to their local shopping centre or their doctor is close by. Last but not least, if they have extra cash after selling their home and buying a smaller home would this affect their pension?

Accessing the equity in your home via a reverse mortgage could certainly be an option. But again the fear of making the bank your silent partner again, holding mortgage papers on your house can be a very daunting thought for an older single age pensioner.

Trying to educate and change a person’s mind and attitude who maybe in their eighties in relation to home ownership and the age pension is not easy. However, for a person in their fifties and sixties approaching their retirement, I believe this education and attitude change is a must, going into the future.

Source: Mark Teale | Centrepoint Alliance

Should we be able to access our super to buy a home?

Is it a viable solution to grant early access to super to put towards purchasing a home?

The first thing we need to come to grips with is whether the access to super should be available irrespective of the number of houses people have owned, or whether it should be restricted to first home buyers. Secondly, just how much should we be able to withdraw – 20%, 50%, or all of our super savings?

The most recent version of the discussion talks about allowing a couple of years of compulsory superannuation contributions – the 9.5% superannuation guarantee contributions – to be diverted and used towards a home deposit. The information that I was looking at required an individual to match their superannuation contributions with personal savings on a dollar for dollar basis.

This would at least encourage people to make a concerted effort to save for their home rather than simply rely on their ability to withdraw amounts already in super.

Allowing access to superannuation savings, or providing other cash incentives including first home buyer grants, stamp duty concessions and the like, will simply mean that more money is available to chase the same number of properties. This means, when our first home buyer goes to an auction on Saturday morning, they will have another few thousand dollars more they can bid and so will the other bidders. The highest bidder will win the prize.

I don’t think that throwing more money at the problem is going to make housing any more affordable than it currently is. Perhaps, part of the solution is to seriously examine the supply side of the equation.

I am not necessarily suggesting we should be creating even more housing stock in our capital cities. An increasing focus on regional development, placing some restrictions on the sale of Australian properties to foreign investors, and changing the tax mix in relation to negative gearing and capital gains tax, might be ideas worth considering.

Source: Peter Kelly | Centrepoint Alliance