Pre Retirement Plan – some overview thoughts.
At what age should somone seriously start pre planning their retirement ?
Money doubles in value every 10 years if your investment maintains a steady average return of 7.2% p.a. (after tax).
In this day and age a 7.2% return over the long term is ambitious.
So, to have half a million dollars at retirement, based on the 7.2% then you need to have $125,000 at 45. Additional contributions over the next 20 years could then offset inflation and lower investment returns. But how much extra ? You need to also choose a suitable set of investment options.
The Government has the Transition to Retirement provisions to help build up your Superannuation, but that assumes you do it from age 55, which is only 10 years out from retirement.
If you could achieve $500,000 saved at 65 would it be enough, with a bit of age pension, to live comfortably? Assuming no mortagage or rent payments, then you might get by, taking only 5% of the pool plus some allowed aged pension. Would you get by?
So a few of points to note:
- Relatively painless retirement planning should start at about 45 years of age, the sooner the easier. A retirement plan should start in your mid 40′s.
- In a low return economic environment achieving 7.2% ongoing is hard and more likely to be about 4 – 5% p.a.
- Saving and investing extra funds to offset a low start balance, low returns and inflation is easier if your time frame is longer – 10 years is a bit short.
- We used 65 as an assumed retirement date – but from 2017 it will be 67 to be able to access the aged pension.
- Everyone’s circumstances is different – how you best manage your situation should be reviewed with an advisor; and perhaps some budget trimming needs to start now.
BUT.. . if you have not done this – even if you are starting with only 3 – 5 years to go to retirement there are still options that can be employed to boost your superannuation and retirement prospects.
You can contact me for an obligation free discussion to assess your situation. .. 02 9324 8834
See Tips for Young Achievers – (in Insights - on the Horizontal menu) which is a suitable companion to this overview.