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The September quarter Retirement Standard was released by the Association of Superannuation Funds of Australia (ASFA) late last week, and the news isn’t positive for retirees.
According to the statistics, in order to live a comfortable lifestyle in retirement single retirees will need to spend $767 more per year than this time last year, and couples will need to spend an additional $1,131. The main increases can be attributed to the rising cost of fruit, property rates and charges. Couples wanting to live a ‘comfortable’ retirement will need to spend $58,326 per year, up 0.3 per cent on the previous quarter, requiring a combined super total of approximately $510,000. Single people seeking a ‘comfortable’ retirement will need to spend $42,597 a year, an increase of 0.4 per cent from the previous quarter, and they will need to have accumulated a super balance of approximately$430,000.
ASFA CEO Ms Pauline Vamos says in the media release that the rising cost of living shows just how important it is to save as much superannuation as you can afford before you retire.
“When you are no longer relying on a wage or salary, even small increases in the cost of living can hit hard, particularly when non-discretionary items such as food or medicines are affected. The best way to shield yourself against increasing costs is to save as much money as you can while you are working”.
This will give you the financial freedom to live the lifestyle you want in retirement.
“It’s also important that people think about creating or buying an income stream that will spread your superannuation savings across your retirement years and that can be adjusted to accommodate rising prices,” Ms Vamos says.
One key step that we can take to accelerate our superannuation savings is to start the savings process earlier. Using the power of compounding interest (when you make regular investments, and earn “interest on interest”, read more here,) you can start to make small contributions more regularly that fit in with your budget. These can be started as early as you can afford to forego the small amount from your everyday cashflow.
You should keep in consideration the actual amount you can contribute to super depending on your age and the legislation, but we can help with this.
I would urge investors to think as soon as they can about the following three questions:
The sooner we all start to think about these issues, and make small steps towards meeting them, the better the chance that we will succeed later in life. If you would like to discuss this further with us and determine strategies that will allow you to meet these goals sooner, please call us on (03)9999 7200.
All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.