Want to set some realistic financial goals
The good news is that everyone is living longer. The bad news is that, for
some, their money will run out before they do. Taking that into account, and
also the fact that the government will not be taking care of so many of us in
retirement means that we have to set our own financial goals.
What we set aside today for use tomorrow must be realistic in both today's
terms and tomorrow's. It's no good sacrificing everything we have now to
guarantee a luxurious life later, nor is it beneficial to keep hoping that
someone else will take care of us and frittering away all of our income. We
need to set a balance between lifestyle now and lifestyle later and make the
best of current legislation and rulings.
Experts estimate to maintain our current standard of living in retirement we
should save between 15-20 per cent of our gross income every year. This should
ensure an annual income in retirement of between 50-70 per cent of your current
annual salary.
As a general rule, increase your contributions into superannuation as you
approach retirement. Debts should be paid off and plans made for major
expenditures such as a new car, holidays and possibly a new home.
It is estimated that, on average, you have to be in a super- plan for 45 years
to get 50 per cent of your annual salary a year in retirement. If you're only
in it for 20 years, you're looking at only 10 per cent of your final salary.
It's not nearly enough and makes an enormous difference to your lifestyle in
retirement.
For this reason, it's a good idea for a young person just starting work to make
voluntary "top-up" contributions. Giving your super a kick-start before some
other big life commitments begin will allow you to sit back and revel in the
benefits of compound interest.
Once you have a family and a mortgage, significant saving is out. Paying off
the mortgage, contributing to super and maintaining adequate life insurance are
the priorities.
When you reach your 50s super becomes the priority. Salary sacrificing into
super is generally recomended.
Professional advice to guide you through the complexities of superannuation and
tax system is essential and each life change, new job, marriage, house
purchase, redundancy, etc. should see you reviewing your strategy.
