Managing Retirement Savings in Volatile Times
How much will I need?
Most of us daydream about the day we can finally stop working and retire. Whether you dream of traveling around the world, camping throughout Australia, or simply pottering around in the garden and honing your golf skills, the magic question is: how much money do you need to make your retirement dreams a reality?
Take some of the guesswork out of future planning. Calculate how much super or retirement savings you’ll have when you retire and whether it’ll be enough to support your desired lifestyle. Moreover, estimating how much money you’ll have when you retire depends on things like your current salary, super balance, and assets. With so many factors, it’s clear to see why you would need a retirement calculator to figure out how much you’ll need to retire comfortably.
According to the Retirement Standard of the Association of Superannuation Funds of Australia (ASFA), single people would need $595,000 in retirement savings at age 67, while couples would need $690,000. This calculator can help you figure out how much money you’ll need for a ‘comfortable‘ or ‘modest‘ retirement. The Standard is updated four times a year to reflect rising prices for essentials such as food and utility bills, as well as shifting lifestyle expectations and spending habits. Health, communication, clothing, travel, and household products are all included in the Standard.
It’s never too early to begin making plans for a better financial future.
Here are some tips for managing retirement savings in volatile times. Don’t panic. Things will recover over a long enough time period.
- No lump sum withdrawals for cars and holidays.
- No panic selling, cashing out, or investment switching.
- Reduce the pension from your retirement savings if you have enough cash to live off for a while. There is a minimum, but it is each year, and hopefully things will be less volatile by June.
- If possible, your pension payments may benefit from being made fortnightly instead of monthly to allow for dollar cost averaging on the way out. Not at the mercy of the value on one day of the month.
You should know this—we live in a great country and you will always have the age pension to fall back on should your retirement assets drop that far in value. Without debt, it is liveable.
Once things return to normal, consider using an annuity for an additional income layer over just the age pension. This can be useful to address the fear of outliving your retirement savings and has some benefits for the asset test for the age pension.
For my retirement clients, we usually hold two years of income in cash. It makes no money, to speak of, but it means that in times like these, they can still draw an income without selling growth assets and concreting any losses.
Remember that your investments and shares are unitised. Think of it like fuel for your car. You had 100 litres and fuel cost $2 a litre. Now it is $1.50 a litre, but you still have 100 litres and the market has always recovered.
Retirement savings, or, in general, retirement planning, is challenging, because everyone’s situation is unique. It’s never too early or too late to begin planning for life after work. Whether you’re still in the planning stages or have already retired, consider seeking personalized advice from a financial adviser to assist you in making long-term financial decisions.
Finally, please look after your health. This Wuhan virus impacts people over the age of 60 more significantly than younger people. Don’t go to places with lots of people unnecessarily; consider getting groceries delivered; wash your hands regularly; and if you feel sick stay home. Take care.
