What you need to do to become a self-funded retiree

I don’t really like to make predictions when it comes to finance. As we all know, past performance is only an indicator of future performance and nothing should ever be taken for granted. But there is one thing I consider so certain that I’m willing to say it out loud.

In 30 years the aged pension will be nothing like it is today.

Ok, I know that’s not really controversial but I’m a pretty conservative kind of person, that’s a big call for me! Anyone who understands our economy and our current population rates, understands that the pension is completely unsustainable in its current form. Knowing this, it would not be unreasonable to assume that if the pension does exist in 30 years, living on it is not going to be pleasant.

So what can we do? Well my personal plan is to be self-funded, meaning I will have enough money that when I retire, I can pay for all my own expenses. How much money will I need to do that? Well that obviously depends. In 2010 the Association of Superannuation Funds of Australia released a study with recommended figures. These are obviously estimated and how much you need will depend on your individual circumstances combined with some predictions regarding your likely life span.

The figures provided by APRA get updated regularly and as at the June Quarter 2015 a couple looking to live a ‘comfortable lifestyle’ could expect to need a yearly amount of $58,784. This goes down slightly once the couple hit 85. If you want more information check out the ASFA website on www.superannuation.asn.au.

So how much money will my wife and I need to do this? There are so many variables to this figure including how long we intend to work, how long we are going to live and how our investments perform. This article from SuperGuide provides some great recommendations here and recommends a figure of $1.1 million taking into account no age pension: http://www.superguide.com.au/boost-your-superannuation/comfortable-retirement-how-much-super-need. Obviously, this is based on a huge number of assumptions which you can see in the article but this gives me a bit of guidance. Personally, I would like to save more, you can never have too much money for your retirement! (well not us normal non-billionaires).

So how can I achieve this? Well to achieve this number you are going to need a plan, after all those that fail to plan, plan to fail. My wife and I have an investment strategy which suits our personal needs. Our investments are diversified and are both within and outside of the superannuation environment. We review these every year and make changes based on investment returns, rebalancing our portfolios and changes to tax and general laws. Our current trajectory suggests we will get there in the end but this will involve years of diligent saving, investing and being responsible. The plan that would suit you is entirely based on your personal circumstances, but most, if not all people can achieve these goals with a little forward thinking.

I’m quite looking forward to my retirement. Endless days of lawn bowls, drinking mid strength beers and enjoying the little things in life. I’m not going to let money prevent me from enjoying these great years of life.

What about you? What are your plans for your twilight years? 

This post is from Ben Brett, check out our details in the About Us section.

Posted in: Ben BrettFinancial Planning, and Investments, Superannuation

About the author: Cara Brett

Cara Brett proudly heads up Bounce Financial - founded in 2014 after a successful, decade-long career in the financial services industry. Cara’s experience encompasses both the financial product and financial advice sides. This gives her a comprehensive and holistic knowledge of all facets of financial planning.