Retirement Planning 101
Retirement planning is key to a financially secure and fulfilling post-work life, a steady income in retirement. It’s not just about saving money; it’s about creating a roadmap to a comfortable and enjoyable future.
Understanding the basics of retirement planning, including account-based pension and age pension, will help you make informed decisions about your retirement strategy. An account-based pension allows you to draw a regular income from your super fund once you retire, while the age pension is a government benefit that gives you extra money. Knowing the difference and how each can help you is crucial.
Retirement age and preservation age are important factors to consider. Your retirement age is when you plan to stop working, while your preservation age is the earliest you can access your super fund. These ages will impact your retirement strategy and when you can start enjoying the fruits of your labour.
Government benefits, such as the age pension, can supplement your retirement income. Understanding the eligibility criteria for these benefits is key to making the most of your entitlements and having a more comfortable retirement.
A well-planned retirement strategy will help you achieve your desired lifestyle, recreation, staying active and socialising. It’s not just about the money; it’s about being able to live the life you want in your golden years.
When planning for retirement consider your annual income, super balance and investments. These will help you build a comprehensive plan for a comfortable retirement. Starting early will have a big impact on your financial future and ability to retire comfortably.
Seek advice from a financial advisor to create a personalised retirement plan that takes into account your individual circumstances and goals. They can give you valuable insights and strategies to help you achieve your retirement dreams.
Retirement planning is not just about finances; it’s also about being healthy and active. Access to healthcare and public transport are important considerations that will impact your quality of life in retirement.
By understanding the importance of retirement planning and taking action you can have a stress free retirement. Start planning today and build the future you deserve.
The Reality Millennials Face
For years millennials have been labelled the “Peter Pan” generation — young, carefree and in no hurry to grow up. But the tide has turned. Today millennials are no longer fresh graduates or new to the workforce. They’re adults aged between 28 and 43, many juggling career progression, mortgage applications and starting families. Those born before certain years may be eligible for different government benefits, so it’s important to understand eligibility based on birth year.
And while retirement may still feel like a distant concept, the early 2050s will be here before we know it. It’s time for millennials to realise that planning for retirement today isn’t just smart — it’s necessary. Considering the cost of living, it’s also important to think about whether having a car is necessary, especially if travel frequency decreases in retirement.
Taking super savings as a lump sum may seem appealing for immediate financial needs but it may not cover the lifestyle you want in retirement. Relying solely on government entitlements like the Age Pension may not be enough, so it’s important to plan thoroughly.
Retirement Isn’t as Far Away as It Seems
Retirement may seem irrelevant when you’re focused on saving for a home, paying off HECS debt or navigating the cost of living. But the numbers don’t lie. According to Investopedia, a millennial aged 26 should have one year’s salary saved in super within four years. By 40 that goal rises to three times their annual income.
To stay on track it’s recommended millennials contribute at least 15% of their gross income to superannuation each year. That includes the current 11% Super Guarantee (SG) from employers — so individuals need to top up the rest themselves.
For many this feels impossible.
Meet Sloane: A Millennial Caught in the Middle
Take Sloane — a 29-year-old accountant earning $95,000 a year. Her employer contributes 10.5% to her super, but she has less than $100,000 saved. Instead she’s prioritising non-super savings to buy her first apartment. It’s important for Sloane to understand the limits on super withdrawals for each financial year to plan her contributions better. She’s not alone. Like many in her generation, Sloane is juggling student debt, rising living costs, insecure job markets and sky-rocketing property prices. Adding to super can feel like a luxury she can’t afford. And understanding her personal insurance needs is important as consolidating super accounts may affect her existing insurance coverage.
But here’s the thing — Sloane wants a better retirement. One that starts earlier, allows for travel and maybe part-time work — on her terms. But withdrawing super savings as a lump sum for immediate needs like debt repayment or holidays can have long term financial implications. To have that freedom later she needs to start planning now.
Superannuation in Retirement Strategy
Superannuation Can’t Be an Afterthought
Even though many millennials feel they’ll need to work longer they also expect less government support in retirement than their parents or grandparents received. Add to that the rising cost of health care and living expenses and it’s clear: Superannuation needs to be part of every financial strategy — no matter how early it may feel. Managing debts effectively including strategies to pay off mortgages and other loans is crucial to ensure a stable financial future.
For Sloane this has meant re-evaluating her priorities. She’s researching funds with lower fees and stronger long term returns and considering leaning on family support for her property goals — so she can slightly increase her super contributions. She’s also exploring alternative payment plans to manage her existing debt more efficiently.
Getting to a point in life where retirement planning becomes a priority is key. Superannuation plays a big part in this transition helping individuals prepare for changes in work hours or a complete transition away from work.
Take Control, One Step at a Time
The good news? You don’t have to overhaul your financial life overnight. Start with the basics:
- Consolidate your super – Many people have multiple super accounts, each charging their own fees. Combining them into one can save significantly over time.
- Top up when you can – Even small voluntary contributions add up. If you can, aim for that magic 15% mark.
- Make super part of your financial plan – Just as you plan for travel, homeownership or starting a business, super should be on your radar. There are various programs designed to help individuals manage their finances and superannuation effectively.
- Work with a trusted adviser – A qualified financial adviser can help you choose the right fund, optimise your investment strategy and keep you on track over time.
Setting and achieving financial goals is key to retirement planning. Knowing the eligibility age thresholds for accessing super and how reaching certain ages, such as preservation age, impacts your financial decisions and strategies is important for retirement readiness.
Starting early is important because it gives your investments more time to grow. Once you’ve reached your preservation age you can access a transition to retirement pension and withdraw funds from your superannuation through regular payments as you prepare for retirement.
Let Compound Interest Do the Heavy Lifting
Think of your super like a snowball rolling down a hill. The earlier you start the longer it has to grow — and the more momentum it will build. By starting in your 20s or early 30s you’re giving compound interest the greatest gift: time. Planning early also helps you prepare for the financial challenges you may face when you retire.
As you approach retiring it’s important to adjust your investment strategies to ensure a secure future.
At Insight Wealth Planning we understand the unique challenges millennials face. Whether you’re just starting to think about your future or want a second opinion on your current strategy we’re here to help you take the next step with confidence. Evaluating your investment style and understanding the risk involved is key especially as you near retirement.
Because retirement shouldn’t be something you fear — it should be something you look forward to.