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Retirement Planning: hard truths and ugly numbers
Is your retirement going to find you on easy street, or struggle street?
It's part of human nature – we have trouble facing up to our problems. Too often we stick our heads in the sand and hope it all just goes away. I've seen a lot of people take a similar approach to their finances.
So let's have a look at some hard truths about retirement. For many, it's going to be a bitter pill.
- Most retirees will not be able to afford the lifestyle they want.
- According to RaboBank, baby-boomers are expecting to retire with about half of what they think they need. Thirty percent will still be carrying the burden of their mortgage into retirement.
- According to AMP, retirees on their books are saving less than 70% of what will make for an 'adequate' retirement.
Are you saving enough? More importantly, do you know how much you need?
Behind these hard truths lie some ugly numbers:
- The latest Association of Super Funds of Australia (ASFA) 'Retirement Standard' uses a benchmark $40,391 per year to support a 'comfortable' lifestyle in retirement for a single person (assuming you already own your own home with no mortgage).
- Australians are living longer. Men now live up to 79 years of age on average; women up to 84. Life expectancy is currently going up a year every 5 years. Soon, we face the prospect of spending as much time in retirement as we did in the workforce.
- Retirement consultants Mercer report that the typical desired retirement age is 58 years.
So let's do the maths. If you're retiring at 58, living for another 25 years say, and you need over $40K a year, how much do you actually need?
That's right. You will need an income stream that will provide you with over a million dollars through the course of your retirement. It's much more than most people think they'll need. And it's a whole lot more than most people actually have.
What are the options?
And if you don't have enough, what are you're options? You could work longer, or live less, but neither of those is particularly appealing.
You could also take a step down in lifestyle – swap travel for TV travel shows, piña coladas for cordial. But what's the point of spending so much of your life working if you can't finally enjoy yourself in your retirement?
The only sensible option, and the hard truth of it is, we need to start securing our financial future, NOW. Retirement sneaks up on you a lot more quickly than you realise. Tragically, by the time most people stop and face the reality of their retirement savings, it's too late to do anything about it.
Make the future a priority
We need to make our finances one of our most immediate priorities. Business leaders draw a distinction between urgent and important. Good time management is about not letting the things that are urgent (emails, phone calls) distract you from the things that are important (building strategies for the future).
The same is true in life. We can get so caught up in the business of living, that we don't take time out to plan for the future. But the future is coming. And the sooner you get started, the more opportunity your wealth has to grow and grow.
Most people will find the hard truths and the ugly numbers of retirement daunting. But it doesn't have to be that way. There are people that can help. Here at McCarthy Group, we have helped hundreds of people develop wealth strategies that have succeeded in securing their financial future.
We can help you too. Why not book in for an obligation free consultation? We can help you start planning for the type of retirement lifestyle you want.