5 practical steps to start your retirement planning
Retirement is a milestone many of us look forward to, but it also brings along a set of financial considerations on how to spend wisely to make sure your retirement plan doesn’t outlast your savings.
The size of Australia’s total superannuation assets was around $3.54 trillion in the June 2023 quarter report, up 7.6% from the year before, according to the industry regulator the Australian Prudential Regulation Authority (APRA).
But even with a booming superannuation sector, everyone’s individual super balance will be different depending on what you’ve been able to save on the road to retirement. How much you’ll need in retirement also depends on many personal factors, including whether you’re single or part of a retired couple.
For example, couples targeting a comfortable retirement at age 67 should aim for approximately $690,000 in retirement savings, while singles should target around $595,000, says research by the Association of Superannuation Funds of Australia (ASFA).
While these figures are just estimates, they can provide useful benchmarks for your retirement.
That’s why planning for your retirement spending is essential to help ensure financial security once you step away from the workforce. Whether you’re nearing retirement or you’ve already retired, strategic planning can help you retire with some confidence.
How to start planning for retirement?
If planning for your retirement sounds daunting, here are a few tips that could help.
1. Create a retirement budget
If you want to know how much you’ll need when you retire then you need to have an idea of the things that will cost you money. That’s why it’s a good idea to create your own retirement budget.
Start by categorising the essential expenses you’ll face, such as for housing, healthcare, utilities and groceries. Then, allocate funds for discretionary spending, such as travel and leisure.
A well-structured budget acts as a financial roadmap that can help guide your spending decisions and prevent overspending. It empowers you to take control and identify areas where any expenses may be minimised.
For instance, if healthcare costs loom large, you may be able to explore any government-issued concession cards, such as the Low Income Health Care Card or the Commonwealth Seniors Card.
These cards offer discounts and benefits that can ease the financial burden. By incorporating these concessions into any planning, you can optimise resources for a secure retirement.
2. Take stock of your retirement assets
Once you have a clear understanding of your potential retirement expenses, it’s crucial to devise a strategic retirement plan for managing your assets to meet your future income needs.
A common guideline in retirement planning is the so-called “4% rule”, which recommends withdrawing 4% every year of your initial retirement savings.
This approach is designed to try to preserve what capital you have, aiming for a steady income stream by assuming your investments can earn 4% each year.
Remember though, this is based on an assumption and the return on your investments will likely vary, and could be more or less than 4%. Also, past performance is no guarantee of future performance.
The choice and structure of your retirement assets (such as superannuation income streams) is a crucial factor in your retirement planning. For example, different superannuation income streams can offer different features in relation to:
- flexibility
- investment choices
- pension payment adjustments
- lump sum withdrawals.
The choice and structuring of your retirement assets should be tailored to your goals, objectives and preferences.
Compare Superannuation with Canstar
The table below displays some of the superannuation funds currently available on Canstar’s database for Australians aged 30 to 39 with a super balance of up to $55,000. The results shown are sorted by Star Rating (highest to lowest) and then by 5 year return (highest to lowest). Performance figures shown reflect net investment performance, i.e. net of investment tax, investment management fees and the applicable administration fees based on an account balance of $50,000. To learn more about performance information, click here. Consider the Target Market Determination (TMD) before making a purchase decision. Contact the product issuer directly for a copy of the TMD. Use Canstar’s superannuation comparison selector to view a wider range of super funds. Canstar may earn a fee for referrals.
- Performance, fee and other information displayed in the table has been updated from time to time since the rating date and may not reflect the products as rated.
- The performance and fee information shown in the table is for the investment option used by Canstar in rating of the superannuation product.
- Performance information shown is for the historical periods up to 31/01/2024 and investment options noted in the table information.
- Performance figures shown reflect net investment performance, i.e. net of investment tax, investment management fees and the applicable administration fees based on an account balance of $50,000. To learn more about performance information, click here.
- Performance data may not be available for some products. This is indicated in the tables by a note referring the user to the product provider, or by no performance information being shown.
- Please note that all information about performance returns is historical. Past performance should not be relied upon as an indicator of future performance; unit prices and the value of your investment may fall as well as rise.
- Any advice on this page is general and has not taken into account your objectives, financial situation or needs. Consider whether this general financial advice is right for your personal circumstances. You may need financial advice from a qualified adviser. Canstar is not providing a recommendation for your individual circumstances. See our Detailed Disclosure.
- Not all superannuation funds in the market are listed, and the list above may not include all features relevant to you. Canstar is not providing a recommendation for your individual circumstances.
- Canstar may earn a fee for referrals from its website tables, and from Sponsorship or Promotion of certain products. Fees payable by product providers for referrals and Sponsorship or Promotion may vary between providers, website position, and revenue model. Sponsorship or Promotion fees may be higher than referral fees. Sponsored or Promotion products are clearly disclosed as such on website pages. They may appear in a number of areas of the website such as in comparison tables, on hub pages and in articles. Sponsored or Promotion products may be displayed in a fixed position in a table, regardless of the product’s rating, price or other attributes. The table position of a Sponsored or Promoted product does not indicate any ranking or rating by Canstar. For more information please see How We Get Paid.
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Performance and Investment Allocation Differences
- Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology.
- Some providers use different age groups for their investment profiles which may result in you being offered or being eligible for a different product to what is displayed in the table. See here for more details.
- Australian Retirement Trust Super Savings’ allocation of funds for investors aged 55-99 differ from Canstar’s methodology – see details here.
- The Australian Retirement Trust Super Savings (formerly Sunsuper for Life) product may appear in the table multiple times. While you will not be offered any single investment option, this is to take into account the different combinations of investment options Australian Retirement Trust may apply to your account based on your age. For more detail in relation to the Australian Retirement Trust (formerly SunSuper for Life) product please refer to the PDS issued by Australian Retirement Trust for this product.
- Investment profiles applied initially may change over time in line with an investor’s age. See the provider’s Product Disclosure Statement and TMD and in particular applicable age groups for more information about how providers determine their investment profiles.
3. Your lifestyle choices in retirement
When you retire you want to enjoy yourself but that can come at a cost, and less work time can mean more leisure time, which can further add to those costs.
So it’s important to consider what kind of retirement lifestyle you desire, then you can try to align your financial retirement plan to meet those desires.
Remember, retirement is a dynamic journey with many variables that may range from picking up casual work to spending more of your savings in the first 10 years of retirement.
Be mindful too of the delicate balance between enjoying your retirement and preserving enough savings, and your own personal preferences.
Your capital requirement may change as your assets depreciate, government benefits kick in, or if downsizing becomes an option.
4. Reassess regularly your retirement plan
One of the most important things to remember in any retirement planning is that your financial needs and goals may change over time.
That’s why it’s a good idea to keep watch on your finances, and to regularly review your retirement plan to make sure it keeps in alignment with your current circumstances.
This will allow you to make any adjustments necessary to your budget, investment portfolio and withdrawal strategy as needed.
5. Seek advice about your retirement plan
If you want to find out more about planning for your retirement then you can always seek some independent financial advice.
A financial planner can help give advice on your retirement needs, your current financial situation and what you may need to do to reach your retirement goals. They can also take into account your potential eligibility to receive any government Age Pension.
Professional advice can be invaluable in finding which structure is appropriate for your personal circumstances and your retirement plan.
Image source: fizkes/Shutterstock.com
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This article was reviewed by our Senior Finance Journalist Michael Lund before it was updated, as part of our fact-checking process.
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