Make it last

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If you’re looking forward to retiring in a couple of years, the thought of finally getting your hands on your super after a lifetime of hard work can be exciting. You may want to pay off your mortgage, you may have your eye on a new car, or you may be planning a trip around Asia.

At the same time, have you thought about whether your super will last the distance?

Many people make the mistake of viewing retirement as one big holiday and treating their super as a windfall. If you spend up big at the start, you could be struggling later on. Relying on the age pension will put basic food on the table, but you may not have much left over to enjoy the lifestyle you deserve.

With Australians living longer, your retirement could last 30 years or more. You could find your money running out very quickly.

Rethink debt repayments

Taking your super as a lump sum to pay off all your debt as soon as possible may seem a tempting prospect. But for some of you, using up the lump sum to pay off all debt may not necessarily be the best use of your retirement nest egg. You could end up asset rich, but income poor.

You’ll also need to think about the tax implications. Some ‘bad’ debt, such as credit cards, personal loans and mortgage loans, is not tax deductible. Other ‘good’ debt, such as investment loans, is tax deductible. Generally, you’re better off dealing with the bad debt before the good debt.

Think about your investments

Turbulent investment markets are always tricky to navigate. But when you’re retired, you don’t have a regular pay cheque to make up lost ground. You’re looking for consistent returns and you don’t want any nasty surprises.

Many Australians have turned to term deposits. When interest rates were higher, term deposits may have made sense. They offered decent returns and peace of mind. But with official cash rates down, they could leave you at the mercy of inflation, particularly as a higher proportion of your budget could possibly be going on increasing healthcare and power bills.

Term deposits still have their place… but as part of a diversified portfolio that generates enough income to enjoy a comfortable retirement.

Take full advantage of benefits

Many self-funded retirees are entitled to Centrelink benefits and healthcare cards.

And if you’re still working part time, you should consider taking full advantage of schemes such as the government co-contribution.

Consider staying in the workforce

The division between work and retirement isn’t clear cut any more. More than two in five Australians who work full time and intend to retire are looking to reduce their hours first.^[1]

Working part time not only keeps some money coming in – it can also keep you connected to a wider network of people, give you the chance to teach others, enable you to do what you love at a slower pace, and generally help you to stay active.

Aim for the long term

You’ll need to develop a long-term strategy that generates income and capital growth to make sure your money lasts for as long as needed.

Keen to get a more in-depth view of your options? Call us on 02 9299 9777 today – we’re ready to help.

[1] Source: Australian Bureau of Statistics. (13 December 2011). Summary of findings in 6238.0 – Retirement and retirement intentions, Australia, July 2010 to June 2011.

What you need to know

Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.

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