Retirement Planning Milestones – Life Stages + Planning
Written by: Jayden Scott l Canny Advisory
Retirement is a significant life milestone that we all aspire to reach comfortably. However, the key to living a comfortable retirement lifestyle lies in early and strategic planning.
For many people, our superannuation will end up being one of the largest assets we own. However, many people often disregard it or do not pay enough attention to it in the earlier stages of their working life. This can be for many different reasons, but ultimately it can be drawn back to people focusing on living the lifestyle they want to in the current moment.
Now, this is completely okay, and we shouldn’t be sacrificing our current standard of living significantly and waiting until we retire to live the lifestyle we want. It’s all about balance between living the lifestyle you want to right now, while being mindful and planning for the lifestyle you want to be living in your future years.
I will delve deeper into some figures in this blog and show you how small changes and early planning can provide great benefits to future you, without making major sacrifices in the current moment. I will also provide some figures that demonstrate what little planning until you’re in your 50s and 60s may look like for your retirement. Furthermore, I will also delve deeper into some key things to consider when retirement is nearing, as well as some key things to think about post-retirement to ensure that you plan accordingly to live your ideal lifestyle throughout retirement.
Retirement Planning in Your 30s + 40s
In your 30s and 40s, let’s be honest, your superannuation may not be at the front of your mind! You may be travelling, focusing on paying your mortgage, focusing on your career or raising a family. This is normal to be thinking about and prioritising many of these things that are relevant right now for you and your family.
This can also mean that you may lose sign of the long-term picture, which could slowly affect the lifestyle you are able to live in retirement.
Compounding
I’m sure a lot of people have heard someone talk about the power of compounding at some point in time. Not to sound like a broken record, but the power of compounding and how small changes could make a huge difference on your final superannuation balance is vital to understand. The importance of growing your superannuation balance has never been more important than it is today.
The Government is emphasising this by increasing the mandatory percentage of your salary that your employer must pay into your superannuation, also known as your Superannuation Guarantee Contributions (SGC). They are also emphasising this by tightening the rules around people’s eligibility for the government Age Pension when they turn 67.
Want to know more about the Superannuation Guarantee Contributions and how they are changing? Check out this previous blog we put together: What Is The Superannuation Guarantee + What Does That Mean For Me?
These are clear indicators that the government wants people to become self-sufficient retirees in the future, so we need to be aware of this and plan accordingly. This is nothing to be concerned about, because with early planning, you will be prepared to self-fund your retirement comfortably. To demonstrate why this is the case, let’s look at the numbers.
According to The Association of Superannuation Funds of Australia (ASFA), the median superannuation balance for someone aged 30 is:
- $32,000 for males; and
- $28,000 for females.
Crunch The Numbers – 30yo
For the purpose of this example, we’re going to use a balance of $30,000 at age 30, assuming that you would like to retire at age 60. Now, let’s assume 12% (SGC rate from 1 July 2025 onwards) of a $100,000 per annum average salary over 30 years is contributed to your superannuation. For all calculations, I will use an average annual investment return of 7%.
Using the above variables, your financial superannuation balance at age 60 adds up to $1,463,465.92. Now, let’s assume you start putting an extra $100 per month into your superannuation from age 30 and do this consistently until you retire. Keeping all other variables the same, your final superannuation balance at age 60 would be $1,585,463.02. To save you crunching the numbers, your final balance would increase by $121,997.10, and you would’ve only contributed an extra $36,000 of your own money over those 30 years.
Crunch The Numbers – 50yo
Now, let’s pretend that you decide to wait until age 50 to start contributing more money into your super fund. Using the original variables above (not including the extra $100 per month in contributions), your estimated super balance would be $642,088.83 at age 50.
To reach a balance of $1,585,490.72 at age 60 like the previous example, you would have to contribute $705 per month on top of your superannuation guarantee contributions from age 50 to reach that figure. In that 10-year period, your extra contributions would have given you a final balance that’s $122,024.79 higher than what your balance would have been without those contributions. However, you would have contributed $84,600 extra of your own money to reach that figure.
This means that to reach around the same final balance, you would have contributed $48,600 more of your hard-earned money if you started at age 50, compared to age 30. This gap only widens with the more money you contribute into superannuation from an early age.
Please note these calculations are for indicative purposes only and do not consider any fees or taxes being applied to the account, so these balances will vary depending on your super fund and financial institution.
(Superannuation) Rules…
There are lots of rules, caps, and other factors to consider when contributing extra money into superannuation. Furthermore, there are many other things to consider on top of contributing to superannuation when planning for retirement. Things such as:
- Choosing what super fund is right for you;
- The right investments for your risk profile; and
- Protecting your assets through insurance.
All of the above points are all so vital to retirement planning. Things like choosing what super fund is right for you, the right investments for your risk profile, and protecting your assets through insurance are vital to retirement planning. I’ve demonstrated the benefits of making small contributions to superannuation earlier on for your retirement planning. I can assure you that things like reducing your fees inside super or achieving higher investment returns over a 30-year period, can also make a significant difference.
This is where one of the trust financial advisers at Canny Advisory can help educate and guide you through your retirement planning. They have helped many clients, of many different ages plan for retirement and are extremely passionate about ensuring that our clients can live the lifestyle they want, in retirement.
If you are going to take anything for this blog, remember that it’s never too early to start planning!
Financial Advisory Retirement Planning In Your 50s + 60s
We’ve discussed compounding in detail, which is the main goal when you are in your 30s and 40s. Once you’re in your 50s or even your 60s, this is when you are hopefully starting to seriously consider:
- What you want your retirement to look like;
- When you want to retire; and
- How you want to live in retirement.
You would have already accumulated a lot of your wealth, and now you are wanting to know how you can best prepare over the next few years for retirement and make that transition as smooth as possible.
In many cases, this is when a financial adviser can provide the most value to you. They may ask you many different questions that will encourage you to think outside the box and consider things you may never even have thought about. Having this conversation can be very informative and encourage you to start thinking about questions like:
- What balance would I likely need in my superannuation to support the lifestyle I want to live in retirement?;
- How much income do I actually want from superannuation and how can I most effectively meet that requirement without outliving my money?;
- What should I be doing with my investments within my superannuation and how do I manage investment risk?;
- Are there any caps or rules that may affect my situation and do any alterations need to be made?;
- What tax considerations are there and how can I reduce the tax I’m paying in retirement?; and
- Am I eligible for the Age Pension or any other concessions?
There are so many more topics that a financial adviser can discuss with you when leading up to retirement, however, this will give you a good idea of what could be discussed.
The financial advisers at Canny Group are experts in retirement planning and are highly skilled at listening to their clients. They have meaningful conversations with their clients to ultimately help them make that transition to retirement as smooth as possible and ensure that their clients live the retirement that they want to live.
Post-Retirement Planning
Things are forever changing, and that often includes people’s circumstances throughout retirement. There are always things that need tweaking and adjusting to meet those changes in circumstances. Whether it’s selling a house and moving, wanting to go on that overseas holiday, or buying that car or caravan. There are also external factors that are continually changing, such as managing investment risk and the need to continually review your investment strategy.
While many of the foundations for your retirement may now be set up, your circumstances at that current moment may be completely different to what they are two years down the track. Continuing to use the services of a financial adviser can give you peace of mind that anything that needs adjusting will be done proactively.
Retirement Planning with Canny Advisory
When it comes to your retirement planning needs, you can put your mind at ease and know that your financial adviser is across your income needs and ensuring that you will be able to live the lifestyle you want in retirement without the concern of outliving your money or worrying about investment markets. This is your financial adviser’s job to be across this. It allows you to focus on living your life in retirement, stress-free, while your financial adviser takes care of the technical side of things for you.
Get in touch with our team to have a chat and see how one of our financial advisers can set you up, no matter what stage of life you’re in, for your retirement!
