Planning for Retirement is Essential - no matter how old you are!
Retirement is a big topic - and an important one, particularly for women. Consider for a minute how long you will actually be retired for - could be 30 years or even longer. Today we are talking about getting serious about planning for this period of your life. I promise you, it will be worth it.
Let's take a minute to figure out where you are on the timeline between starting work & retirement.
If you’re in your 20’s you’re probably thinking, omg superannuation is so boring – retirement is so far away I really don’t need to worry about that now.
In your early 30’s? It’s probably on your horizon but if you’ve chosen to have kids it might lost in the lack of sleep fog.
Late 30’s? Yeah, I probably should start thinking about that…but...life is so busy.
40’s? OMG – how did I get to be 40? I’ve still got 20 years till I want to retire though, so all good.
Mid-late 40’s? If you’re not thinking about this yet – you absolutely should be.
You’ve been at working age now for around 20 years – it’s only 10-15 years till you retire and there’s only so much you can actually save each year.
First, let’s look at the shocking statistics about retirement for women (thanks to http://www.womeninsuper.com.au/content/the-facts-about-women-and-super/gjumzs for providing this information).
The Headlines
1. Women currently retire with 47% less superannuation than men
2. Women live five years longer than men on average
3. Women only receive 1/3 of the government tax concessions on super (men receive the other 2/3)
Quick Stats
1. 40% of older single retired women live in poverty and experience economic insecurity in retirement
2. 65.3% of the workforce are women
3. 44% of women rely on their partners income as the main source of funds for retirement
4. 8.5% of women between 65 and 74 still have a mortgage
5. The average female salary is $44,000 (including part-time workers)
6. Female graduates earn $5,000 less than male graduates in the same role
7. Women spend on average five hours more per day caring for children than men.
I don’t know about you but I think it’s really shocking how many women retire without superannuation!
When 1 in 3 women are retiring without any super, something needs to change – and fast!
4 STEPS TO MAKE SURE YOU DON’T BECOME ONE OF THE 40% OF WOMEN LIVING IN POVERTY IN RETIREMENT
Step One – STOP burying your head in the sand. Wherever you are in your working life, start now. The sooner you do something about this the better your circumstances will be in the future.
Step Two – Find out the Facts about How Much Super You Have Today. You absolutely need to know where you are starting from - seems pretty logical.
Step Three – Calculate how much you need.
How much money do you need to live a comfy life in retirement? When do you plan to retire? Fun fact – the Age Pension does not kick in until age 67. 67!
An average rule of thumb as outlined by the good people at https://www.superguide.com.au/boost-your-superannuation/comfortable-retirement-how-much-super-need (this website is a goldmine of information by the way so don’t hesitate to get over there & read up) is as follows:
“A single person can expect to enjoy a ‘comfortable’ life in retirement if they can generate an annual income of $44,011 by retiring with a superannuation lump sum of at least $590,000 (assuming investment returns in retirement of 5% a year) in conjunction with a PART Age Pension. Or a superannuation lump sum of at least $425,000 if retirement investments generate a return of 7% a year, AND the individual also receives a PART Age Pension.
If the individual expects his or her retirement savings to be invested in more conservative investments, then an individual will need a superannuation lump sum of at least $790,000 (assuming superannuation investments in retirement generate a return of 3% a year) to produce the annual income necessary to deliver a ‘comfortable’ lifestyle.”
All the talk about return rates refers to how your super savings are invested (we've already discussed the rates of return in relation to Risk profile - the lower the risk, the lower the return).
If you are working with a Financial Adviser they may assist you to invest your super savings in a variety of different ways to achieve higher rates of return, depending on your risk profile.
If you aren’t, it’s probably best for initial calculations to assume that you would be looking at the more modest number of 3%.
Let’s look at the numbers then to see how you might be doing.
I ran a super projection on the First State Super website at https://firststatesuper.com.au/member/super/how-much/super-projection using the following numbers and assumptions:
Female
Age 45
Earning $103k per year
$300,000 in assets
Home Owner (i.e. an assumption that I own a place to live and will not need to worry about rent)
No spouse
Assumed I would work for 5 years at 3 days a week, from age 60
Said I had $175,000 in super currently
According to their calculator, I would have $488,000 total to fund my retirement. Living on $38k per year ($3.1k per month, $730 per week), this would RUN OUT at age 87! That means no more money after I turn 87!
The example included a lot of positive assumptions as well, and not everyone will be in as good a position as my trial calculation.
Now compare that to the numbers above that suggest a single person would need a $790,000 super fund value at retirement (assuming the less aggressive return on this investment).
For comparison, today a single person retiring at age 67 receiving the full pension would be getting around $21k per year (this doesn’t take into account any other benefits or pensions that may be payable depending on individual circumstances). If you are still paying rent this would be very difficult to manage - a two bedroom flat in Sydney costs around $550-$600 to rent per week.
Step Four – Take Action
The good news is, you're already on the journey unlike so many other women.
If you need help to get on track financially I’d love to help you - check out my Programs here.