The best time to plant a tree is 100 years ago, the next best time is today!

It’s interesting, often when clients come to see us in preparation for retirement they think they need to put all their money into safe conservative cash.  However, that is often the worst thing you can do.

Why?  Well, what you have invested, which is usually in super needs to last for the rest of your life, it needs to keep up with or better still ahead of inflation and where ever possible your capital needs to be preserved.

Having a well-diversified portfolio is a great start.  Diversification can help smooth out the highs and lows depending on your view towards risk.  Diversification is having your investments in a number of different asset classes and also sectors within those asset classes.  If you take Australian Shares, for example, having a portfolio that is overexposed to financials would have resulted in a negative return over the past 12 months, whereas health and materials both had double-digit returns.  But it won’t always be this way as history has shown.

Another good strategy is to ensure that you invest in quality assets and have 2-3 years’ worth of drawings or “pension” payments in cash so that when the income earned from your investments gets added you have a really good buffer against any market downturn or a GFC mark 3.  By doing this it means that you won’t need to sell quality assets in a depressed market to fund your pension as you have the cash available to meet your requirements.

Currently, the best tax environment to invest in is still superannuation.  With fund earnings tax under current legislation at a maximum of 15% whilst in the accumulation phase and moving to 0% when fully in pension, Super provides a good structure to hold your investments.  Yes, we hear you, the government of the day whoever they are often keep changing the rules, but we know that the tax rates are better than if you had your investments held in your own personal name.

So that’s the investment part, sounds easy right!  Well often it’s not, when the markets are going up, everyone is happy and comfortable with their portfolios, it’s those times when the markets are a bit volatile or bumpy that good financial planning comes into play.  It’s when you need the help of an adviser to talk through the various strategies that have been implemented and ensure that your portfolio is well-positioned for the future.

And investments are only one part to ensure that your wealth will last a lifetime, there are numerous other factors that need to be considered, such as how much you are drawing from your super including those unexpected lump sums to fund holidays or a new car.

Have you recently done that dreaded budget or spending plan?  I know it’s often not a nice thing to do, but it really does help highlight where you might be able to save some money or cut back.  It’s surprising the savings that can be found if you do a little research and shop around.

Planning well in advance of retirement is also key, it’s ensuring that you have enough money to live on and that you have maximised your superannuation contributions to build that nest egg that is going to last for the rest of your life.

As they say, the best time to plant a tree is 100 years ago, the next best time is today.  We encourage our clients to start thinking and start planning for retirement today to enable them to have as many choices as they can in building their wealth.  If you start early enough with time on your side then the strategies will help the plans fall into place.

Do you have the right plan in place, does it work for you, does it need a re-work, and will be the right one that will allow you to actively live the life you want to live and ensure that your wealth will last a lifetime?

Reach out and discuss your situation with the JBS Financial Team here.

Jenny Brown – CEO

5 things you need to do to ensure you are ready for retirement

Some of us dream about the day we can finally retire and do all the things we never had time for. The opportunity to travel to Africa, the sea change, or that food safari in Japan. Others feel they’re too busy to think about retirement or fearful they won’t have enough to retire comfortably so they put off thinking about it.

Yet we all know the sooner you start planning, the better your chances of making the most of your retirement years. The fact is, many of us could spend almost as long in retirement as we did in the workforce.

An independent industry research reveals only 44% of Australians over the age of 40 feel prepared for retirement, down from 49% in 2015. More alarmingly, 51% of those already retired expect to outlive their retirement savings, up significantly from 33% in 2013.

In this article, you’ll learn about:

• The biggest issues that can impact your retirement;
• The steps you need to do to plan for the retirement lifestyle you want; and
• How you can close the gap between your retirement dream and your projected savings

Issues that can impact your retirement

Some people enter retirement financially secure but that security disappears over the years. Here are 5 common reasons that cause retirement plans to go off track.

Not understanding your time horizon. This is the length of time you need to hold an investment before you sell and get your money back. Generally, the longer the time between today and retirement, the higher the level of risk your portfolio can withstand.

No spending plans. If you don’t have a rough idea of what your ideal retirement lifestyle will cost, you’ll find it hard to work out how much you would need to save to fund it.

Unrealistic expectation of returns. How much risk can you tolerate to meet your objectives? You’ll need to be comfortable with the risks being taken in your portfolio to achieve the projected returns. For example, when the market declines, buy more – don’t sell. Refuse to give in to panic.

Not calculating how much you’ve got now. How close are you to your goal? If you have debts that need to be paid, will you have enough money saved to live on for at least 20 years after retirement?

Not tracking your progress. While future market performance, interest rates, and government policy are impossible to predict, do you know how much extra contributions you need to make to meet your goal? Is there a gap between your retirement dream and your retirement savings?

As you can see, it’s not always the investment market declines that are the cause. It’s a lack of planning.

Here are 5 simple steps to help you get the ball rolling to plan for a successful retirement.

Step 1: Design your dream retirement

Planning for retirement starts with thinking about your retirement goals and how long you have to meet them. You need to plan for how you want to live and what you want to do. Do you want to go overseas each year? Do you want to buy a caravan and tour around Australia? Do you want to be able to eat out regularly or buy a new car every 2 years? Perhaps you want to help the kids financially.

If you are part of a couple, share your thoughts and expectations. Make any changes now while you can.

Step 2: Determine your spending needs

Most people believe that their annual spending will be lower at 60% to 80% of what they’ve spent previously. This assumption is unrealistic especially if you still have a mortgage or have unforeseen medical costs. We believe it should be closer to 100% because as a retiree, you will no longer be at work for 8 hours a day so you’ll have more time to travel, shop, start a new hobby, socialise and generally spend more.

One way to begin thinking about your needs is to visit the ASFA Retirement Standard which benchmarks the annual budget needed to fund either a modest or comfortable standard of living in retirement. According to ASFA, singles aged 65 would need around $27,913 a year to live a modest lifestyle while couples need $40,194. A comfortable lifestyle is estimated at $43,787 for singles and around $61,786 for couples.

Considering the full Age Pension is currently $24,268 a year for singles and $36,582 for couples, they are even below ASFA’s modest budget. It’s even more challenging if you still have a mortgage or rent, in addition to other expenses.

ASFA’s sample budgets are a good start to get you thinking about your likely costs on a weekly and annual basis.

Step 3: Find ways to save to fund it

Once you know how much your desired lifestyle will cost, it’s time to work out how you plan to save for it. On top of that, you also need to know how long your money needs to last.

For example, if the average life expectancy is 20 years from age 65, then that’s 20 years of income. Singles would need around $545,000 to fund a comfortable lifestyle of $43,787 a year while couples would need a lump sum of around $640,000 to fund a comfortable lifestyle of $61,786 a year (based on a 6% per annum return). So, if your preferred rate of return is lower than 6%, then you will need a bigger nest egg.

Check your superannuation balance, then add your assets outside of super, and then subtract your debts to arrive at your net savings. This will give you a good starting point to work out a savings strategy.

Once your strategy is set, you’ll need to invest it to grow. Will you invest in equities? What about managed funds? Cash? Maybe a combination? What’s important is that you know the projected return on your investments. If you’re 30+ years away from retirement, then your assets should be invested mostly in growth assets such as shares and property. If you’re less than 3 years away from retirement, then your portfolio should be focused more on income-producing assets and preservation of capital.

Are you close to making your retirement dream a reality?

Step 4: Plan for longevity

Australians are living longer, healthier lives. Your longevity needs to be considered when planning for retirement, so you don’t outlive your savings. If you want to retire early, it may mean running out of cash and having to depend on the Age Pension for the rest of your golden years.

Another difficulty is if you have a younger spouse who will likely be dependent on the income from the investment on your demise.

A big factor in the longevity of your retirement asset is your withdrawal rate. Estimating what your expenses will be in retirement is important because it will affect how much you withdraw each year and how you invest your portfolio. If you understate your expenses, you easily outlive your portfolio. But if you overstate your expenses, you risk not living the type of lifestyle you want in retirement.

Step 5: Are you on track?

To work out how much you are likely to have by the time you retire, you can use the ASIC MoneySmart online calculators to help you with this.

If there’s a gap between your retirement goal amount and your projected savings, you can always make additional contributions through salary sacrificing to superannuation or making after-tax contributions.

Alternatively, you can delay retiring to accumulate more money. You can also lower your expectations to have a more modest lifestyle. The choice is yours.

Everyone has different needs with their retirement income. The important thing is to start planning today.  If you’ve already started planning your retirement with the JBS Team, you know you’re in safe hands. If not, you know there is still time to ensure you’re going in the right direction and you’re on track to meet your goals. Reach out to us here and let’s see how we can help!

Final word

Don’t fret. It can often take a bit of time to start planning. Think about your retirement goals. Think about how long the money needs to last. And keep saving. The great thing is, you’re now armed with the tools you need to work out how much you will need to finance the retirement lifestyle you want. All the best!

It’s the getaway you take when a getaway’s out of the question – the staycation. Whether it’s venturing out locally and returning each evening, or taking a few nights to explore places within driving distance of home, the staycation is becoming increasingly popular.

It might come down to time, or money, or just that you simply can’t be bothered with all the rigmarole of going overseas or interstate. Whatever the reason, it looks like the staycation is here to, well, stay.

Why are more people choosing to stay put?

Faced with the multi-headed hydra of stagnant wage growth, the rising price of many of life’s necessities, the lower value of the Australian dollar and an economy growing at its slowest rate since the global financial crisis, consumer confidence is low.

With the family budget top of mind, 62% of Australians plan to keep their annual trip to under $5,000 – which means splashing out on an overseas holiday is shoved on the back burner.

NSW Tourism Minister Stuart Ayres also believes staycations are an attractive proposition, “because of the convenience and comfort in vacationing so close to home. The ease of travel, coupled with exploring the hidden treasures of your own state, makes for a winning combination.”

He adds: “It’s an easy way for people to escape the day-to-day grind, but still have some flexibility within their itinerary. For example, friends or family may choose to join, it’s easy to add on a day or two, and the journey to your destination is often the best part.”

Other benefits, he says, include affordability and convenience: “Holidaying locally is an affordable option for people to get away without having to budget for expenses such as overseas flights, transfers and visas. The convenience of travelling somewhere familiar can also be appealing as the planning time required is far less.”

The pros and cons of a staycation

Pros

• No queuing. An overseas trip involves queuing to check in, queuing at security, queuing at passport control, queuing to get on the plane. And then doing it all again at the other end to come home.
• No need of passports or expensive, bothersome visas. And no chance of locking the passport in the hotel safe and only remembering it when you hit the airport.
• Smaller, lighter bags are less hassle and you don’t have to check them in. They’re not needed at all if you’re a day tripper. There are no luggage size restrictions either, so if you’re taking a quick local trip with the kids, you can pack whatever you want.
• There aren’t any so there are no delays and no cancellations.
• You don’t need to take out extra, expensive policies.
• Luggage again. Unless you’re a real klutz there’s no chance of losing your own bags.
• Proximity to home. If there’s an emergency, you’re close enough to deal with it.
• Getting to know your own area. Staycations are great ways to appreciate where you live.
• No air miles and no flights mean it’s better for the planet.
• Location, location, location. Spending money locally means you’re supporting local businesses.
• It’s cheaper.
• Pet-friendly. It’s not hard to find a local destination where your four-legged friends are welcome. No need for pet-sitters!

Cons

• Being closer to home means being closer to work and the temptation to take that call or answer just that one email.
• You can’t see the Eiffel Tower from your bedroom.

Source: Colonial First State

Whether you’ve already reached retirement or are readying yourself for it, there’s no denying it signals a big change in your life. Here the top 10 suggestions for staying alert and active in your golden years.

Find your joy

To fight feeling a loss of purpose, find something that gives you a sense of achievement and joy, such as travelling, looking after the grandchildren or volunteering.

Learn new things

You’re never too old to learn something new, so look into free courses on offer, learn a language, an instrument or go back to university.

Embrace youth

There’s nothing like having younger friends to keep you feeling young. It will keep you up-to-date with the latest trends and technologies, and in return you can share your wisdom and experience.

Get a dog

A new four-legged friend will keep you active, get you outdoors, make you laugh and, as an added bonus, help you to meet new people.

Stress less

A worry-free mind will keep you mentally happy and healthy, so make sure your financial affairs are in order, and tackle all those little jobs you’ve been putting off.

Laugh often

Laugh as much as you can. Having a good sense of humour and a positive attitude is a must to enjoying your retirement years.

Use it

Do crosswords, puzzles, chess, Sudoku, knitting, reading, jigsaws, cards, and board games – anything that stretches your brain.

Move it

Whether it is Zumba, walking, yoga, lawn bowls, golf, swimming or whatever you can manage, exercise is key to a healthy mind and body.

Reflect and revitalise

Be satisfied with who you are and what you’ve achieved. Learn to live at a slower pace and enjoy the journey as well as the destination.

Source: AMP

Want to boost your financial wellbeing without giving up completely on being spontaneous?  Get on top of your finances and enjoy life more at the same time with our five step guide to living in the moment while saving for the future.

Don’t be a slave to your savings

Mastering money starts with a budget and there’s no doubt that feeling in control of your money is linked to your overall wellbeing. But you might be reluctant to set a budget when it makes you feel like all your money is spoken for. Life can seem very limited if you’ve already decided on the exact destination for each and every dollar.

So instead of becoming a slave to saving for the future, here’s a five-step approach that keeps your options open for doing some spontaneous spending once in a while, without losing out on your future financial stability as a result.

1. Get cash flow savvy

Figuring out just where your money is going right now night seem like a hassle. But it’s absolutely necessary if you’re going to achieve your goal of saving and also spending a little just for the sake of it. Understanding your spending habits and patterns can shed some light on where you’re spending more than you need to, so you can start to make better choices with your dollars in step 2.

Doing this weekly makes it much easier to take control of cash flow. A week of overspending can be balanced out quickly in the following week simply by making a few small sacrifices.

2. Budget based on what matters

Now it’s crunch time for making good on those cash flow lessons you’ve been learning. By looking at where your money has been going, you’ve got the knowledge you need to stop spending on things that are less important. This frees up more dollars for your savings and what you really value.

Let’s take dining out for example. If you have your heart set on an overseas holiday once a year, ask yourself if weekly restaurant meals are as important?  By cooking at home for three out of every four Saturdays and saving that money towards travel instead, you’re directing your budget towards what matters to you.

3. Limit fixed commitments

Having more to spend in the present also depends on limiting how much of your income is already spoken for. Mortgage and loan repayments, utility bills, insurance premiums, memberships and subscriptions are all regular payments that can add up to a big chunk of your outgoings. While some of these are essential, avoiding buying things on credit or using a loan can reduce your ongoing costs and free up money to save towards your goals or spend spontaneously.

4. Automate your savings

Whether it’s saving for a new car – so you won’t have that long-term commitment to paying off a loan plus interest – a holiday, or just a rainy day, setting up separate accounts for these goals helps you see that you’re making progress. And making automatic deposits from your income into these accounts is the ideal way to ensure you’re making regular contributions towards your goals.

5. Plan to spend spontaneously

As these savings balances start to grow, it can bring a sense of freedom in your current and future spending choices. Knowing your goals are getting closer allows you to spend money freely and still be financially responsible for your future. And if you want to look forward to a guilt-free splurge, think about dedicating one of your savings accounts to spontaneity.

With a pot of cash on hand to spend at will, you can enjoy ‘live in the moment’ experiences now and again without your future goals or cash flow taking a hit.

How can you get to a stage where you can live your dream today and tomorrow? Speak with the JBS Financial team to help you get started…

Source: Money & Life January 2019 

Every generation thinks life will be different – and of course, each one is right – but when it comes to planning for the future, while we’re young we have a habit of thinking there is still plenty of time. After all, when you’re in your mid-thirties or even early forties, retirement is still decades away; later if the government decides so!

However, like anything forgotten too long, the years pass quickly and the time we could have used constructively has disappeared. For example, early Generation X is now on the countdown to retirement.

If you want to be different today, plan to be different tomorrow.

Start with your grandparents…

What did their working life and retirement look like?

Let’s imagine your grandparents are both in their eighties. It’s likely that Grandad started working in his teens and stayed with one employer for most of his life. Structured superannuation was available to the very few. He retired at 55. Grandma may not have had much paid employment, if any. Their lives can be broken into three phases – education, work and leisure.

But they didn’t anticipate retirement being as long as it’s turned out to be. They’re still healthy, have outlived their savings and are relying solely on the age pension to fund their frugal lifestyle.

Then your parents…

What did their working life look like? How will their retirement be different?

We’ll envisage your parents are aged in their sixties – typical baby boomers. They were better educated than their parents and both worked; though Mum took years off to raise the kids. They accumulated quite a bit of superannuation; Dad has more than Mum.

Their lives can be broken into the same three phases. Education may have extended into their early twenties or they studied later during their working lives. They worked for a couple of employers and, thanks to technology, ended up in careers they never imagined in their youth.

Whilst they have long talked about retirement, now that it’s almost here they face it with some trepidation. They may consider moving to part-time work that will give them more freedom, keep their minds stimulated and still have enough to pay the bills. After all, now they are independent and the mortgage is paid off, life is cheaper.

It would be nice to have more time to travel and do the things they would like to do. They’re both fit and healthy and if they live as long as their parents that will be 20 or 25 years of leisure.

Will Mum and Dad have enough money to live a comfortable lifestyle for that long?

And what about you?

You and your siblings are not going to rely on one employer or one lifetime career. Balancing life and work is more important as you take time off to travel, do volunteer work or try new adventures earlier in life. And being so versatile, when you resume your career you simply re-train.

What this means is that you will have multiple periods of education-work-leisure in your life, and as you will probably be much healthier than previous generations you don’t see working longer as a problem.

But will you be able to afford 20 or 30 years with no income? That’s a sobering thought at any age.

It’s time to be different now.

Many social commentators class Generation X as stuck in between the two “noisier” and more well-known generations – Baby Boomers and Gen Y – but that doesn’t mean you should fade into insignificance. Be the first generation to truly take control of your retirement at a younger age. Stop the trend and talk to us about the many strategies available to give your retirement savings the boost it needs.

Be different today so you can be different tomorrow.

Are you looking to retire?  The Association of Superannuation Funds of Australia (ASFA) regularly publish figures and the December 2018 ones showed an increase in the costs of retirement.  The average cost of retirement for people retiring at age 65 is approximately $60,977 per annum for couples and $43,317 for singles for a ‘comfortable standard of living’.

So the question then is, how much money do you need when you retire?  Based on the figures released by ASFA, an average single retiree would require at least $545,000 in super benefits in order to fund their retirement and couples would require around $640,000.  This is assuming you are a home owner with no mortgage.

But what do all these numbers mean to you and your retirement?  Well, really all these numbers are just that, ‘numbers’.  It’s important to understand that a comfortable lifestyle for one person may not be the same for the next.  Some retirees may require $100,000 per annum to live comfortably and others may only require $40,000.  One thing that is certain however is the cost of living will go up in the future and most importantly you need to prepare for it.

Instead of worrying about the large sums of money required to retire on, it’s really important to have an understanding of the level of income you require once you’ve retired and work out from there how much you require in order to retire comfortably, taking into account your assets and other entitlements such as the Age Pension.  A good starting point to determining how much you’ll need is to take into account your current living expenses.  A common mistake here is to use the “off the top of my head” figures to determine expected living expenses.  The issue with that is, often we under and over estimate expenses, which leads to very misleading results.

At JBS, we recommend doing a budget, yes I know I hear you groan at that, but it really is the best way to calculate just how much you are spending each week, fortnight or month.  Another common way is to review how much your credit card statement is each month for the past 12 months, plus how much you have taken out in cash.  Pulling a csv statement of each of these accounts will help you get these figures and you might just get a surprise at where your money really is going if you haven’t done this for a while.

Once you’ve determined your living expenses, the next step is to review whether certain expenses you’re paying today will still be payable once you’ve retired.  Often these may include your mortgage repayments, expenses for kids, and work related expenses.  Once retired, it’s likely that these will be replaced by more travel or expenses and time for hobbies or grandkids and all this needs to be taken into consideration.

Say you’re 55 years old, you’ve done your sums and calculate you’ll require $60,000 per annum in retirement.  How do you then determine the following?

• How much do you require to put into super each year to meet your retirement goals?
• Will your super benefits be enough to fund your retirement expenses until your life expectancy?
• When is your life expectancy?
• When will your super and investments run out, and
• How often should you review your retirement benefits to ensure you’re on track to meeting your goals?

From what you’ve read so far, I imagine you’re beginning to understand the complexity in determining how much you require to retire on.  The main point to highlight is that you need to take time and be realistic with your budgeted retirement expenses.  Know where your money goes now (before you retire) so you can determine if you will spend the same in retirement.

Doing all this yourself can become very complex and seeking professional advice means there’s someone there to assist you in achieving your retirement goals by coaching and helping implement different strategies to suit your needs.  You can then worry about what you’re going to do in retirement rather than worrying about how you are going to fund it, as you’ve outsourced that to us!

Do you have a plan for retirement?  Now I don’t necessarily mean what age you’re going to retire at, if indeed that is your plan.

I’m talking about what you want to do when you retire from working full time?

For those who have read my articles and blogs or watched my videos in the past you’ll know that a common theme we talk about is “knowing your financial freedom number” we suggest how you obtain that is by listing down what you want to be doing in retirement.

Ask yourself the question: Is retirement tending the veggie patch, looking after the grandkids, playing more golf or bowls, taking those art classes, travelling to each of the points where 2 oceans meet around the world, driving Route 66 in a convertible mustang, ticking off all the possible cruises you can go on, or all of the above?

Whatever it is, it needs to be important enough to you, to ensure your plans for saving and investing are a priority to get you to that point where you can tick off the bucket list items.  We really encourage our clients to take the time to consider this from as early as they can, to ensure that we are able to put the right plan in place that works for them.

Once you have decided on what you want to do, when you can move into that phase where you are no longer working because you want to, rather than you have to, at that point it’s then about how much money you will need to tick off the bucket list items, plus how much will you need to run the household.

Many of our clients come to us with the idea that they won’t need as much to live in retirement as they do when they are working, however what we’ve found, especially in the early years of retirement is that they do, in fact depending upon the bucket list, sometimes it’s more!  So it’s best to ensure that you separate the “living” part of your income you will need, from the bucket list and travel income you will need.  That way you will know it will last as long as you need it to.

The next step is to plan out with your adviser how much you will need as a lump sum at retirement to be able to generate both the “living” income and the “bucket list & travel” income and do this early – the best time to start is the present, today, not tomorrow!  Once you have that, then you need a plan to get there.  How much do you need to invest each month to ensure you will end up with the financial freedom number that will allow you to retire and do the things you want to do.  What to invest into really comes down to how much risk you need to take on – do you have such a big goal that you need to invest more into growth assets, or have you been saving for quite some time and are comfortable with the path you are going down and as a result can have a nice balance of both growth and income producing assets.  And finally whether to invest inside or outside superannuation, or a mix, this will depend upon many factors.  The right plan will cover all of these areas.

What you need to concentrate on is putting that plan in place, setting the bucket list up and ensuring you are checking in regularly with your adviser to know that you are on track to achieving your goals.

Remember once you retire, you’re still investing for the rest of your life, which may be anywhere upwards of 30 years.

So let me finish by asking you this: do you have the right plan in place, does it work for you, does it need a re-work, and will be the right one once you reach that financial freedom number to allow you to actively live the life you want to live.

Want to get started? Head here and let’s chat about how we can help.

Jenny Brown

For the majority of us leaving our office desks forever is something we can only imagine about as it’s so far away.  For the luckier ones that are much closer to retirement this can be a time of excitement and relaxation.  Spending our days at the golf course or with our community groups, families, friends and grand-kids all day every day sounds like heaven on earth.  The transition from full time work to full time play however may become unbearable and is sometimes full of trepidation.  Here are 5 facts about retirement that you should be looking at before retiring.

1. One of the first things retirees discover about retirement is that they have too much time on their hands with nothing to do. Playing a round of golf with mates, or enjoying a drink at the bar will only fill up a certain amount of time in the day and you can’t go doing the same thing day after day.  Couples and singles alike will quickly become very unhappy once they run out of ideas on what to do with their time.  Having ideas in your head on what to do in retirement is one thing; however actually doing them is another.  We often hear clients who have a weekly plan on what they want to do are those who enjoy it most.  You will never be as busy as you were pre-retirement so it’s important to map out ongoing hobbies, part time work and social events before embarking on retirement.  That way you might be one of the clients who say to us they are so busy, they don’t know how they had the time to work!
2. Retired husband syndrome – Many couples get very excited about retiring together, travelling the world together and spending intensive time together. If this is you then consider the fact that you and your other half may have been together for the past 30 years working full time.  Aside from weekends and holidays, you never have to see each other for more than a couple of hours in the morning and night.  Now all of a sudden you see each other 24 / 7 and may even start to discover that you can’t stand being together for a prolonged period of time.  Each of you having your own hobbies, goals and friends will ensure you don’t spend intensive time together.  As my mother said when my father retired, “I married you for better or worse, but not for lunch”.  In other words, she wanted to ensure he also had his routine and didn’t interfere in hers.
3. Not having enough money to fund retirement – Once retired you might have the goal to travel, see the world and complete your bucket list, unfortunately you might not have the funds to do so. Travelling can become very costly.  A single international trip can set you back many thousands of dollars.  By the time your second trip comes around you may find that you don’t have enough funds anymore, so eating out may be out of the question and this year you won’t be able to travel overseas to see your grandchildren.  Having a good financial planner early on can prepare you and set realistic goals for your retirement and help you build your super to achieve them.  This way at least you have a more clear expectation of what you can afford in retirement and prevent any nasty surprises once you’ve retired.
4. Entitlement to social security – At present, the Australian pension age is age 65, which is subject to rules, regulations and changes in the future. During retirement some retirees aren’t aware of what social security benefits they’re entitled to.  Even if you are receiving funds from your Superannuation benefits, you may still be entitled to government age pension (subject to income and asset tests).  Having a good financial adviser will ensure you’re kept up to date regarding any social security payments you’re entitled to.
5. Losing your identity from not being at work – For those of us who are passionate about our profession, this becomes our identity. Anytime your friends or family think of Engineer, Accountant or Doctor, they think of you.  So it’s no surprise that once you retire you may feel like you’ve lost your identity, which may lead to discontent and even depression.  Without the daily interaction of your work colleagues, your mental and even physical health may start to deteriorate.  Retirees who are not very active tend to decline rather quickly mentally and physically.  Joining up to the local gym, taking up classes and just continuing to meet new people will have a longer lasting affect for you.  After all, we all need something exciting to look forward to in the future.

If you are one of the lucky ones thinking about retirement, make sure you start to plan early and talk to the team at JBS so there are no nasty surprises.

There are several different factors that determine how much you can afford to spend in retirement. Some of them are investment markets, super balance and lifestyle changes. One step that people generally procrastinate, which is important in their retirement planning, is figuring out how much is needed to spend in the various stages of retirement.

The below chart shows how retirement spending can change over time

Once a desired level of spending is determined, having a good draw-down strategy in retirement allows you to balance your expenses, savings and the way in which the retirement savings are invested.

A good draw-down strategy may allow you to balance the following objective.

1. Maintain a stable and comfortable standard of living in retirement
2. Maximise your Age Pension and any other potential social security benefits
3. Protect the value of your savings against being eroded by inflation and adverse market conditions
4. Provide you with access to your savings to pay for unplanned expenses (without significant penalties for early withdrawal of your capital), and
5. Minimise the risk that you will outlive your wealth, at least for essentials

Case Study
Consider a 65-year-old retired couple who has combined superannuation assets of $500,000 and want to make their savings last 25 years. The below chart shows the impact of different spending strategies for two of the most common account-based pension (ABP) investment portfolio options – conservative and balanced.

If the couple adopted a spending strategy of $50,000 per year, they have at least a 90% likelihood of success for both options (that is, their superannuation assets lasting at least 25 years).

Alternatively, if they spend $56,000 annually, the likelihood of success drops to 56% with the balanced option and 38% with the conservative option. The balanced option has a higher likelihood of success, due to its larger allocation to growth assets. This increases the portfolio’s expected level of both long-term returns and risk. In contrast, the conservative option is made up of more defensive assets.

Impact of spending strategy and investment option on likelihood of super lasting to age 90

Note: Includes the couple’s hypothetical Age Pension entitlements. Results reflect the superannuation and Government Age Pension rules applicable from 1 July 2017.
Source: Willis Towers Watson

What can you do to achieve your desired retirement lifestyle?
It’s important to have a spending and investment strategy in place that is flexible enough to respond to a variety of factors and risks, including the changing patterns of your retirement income needs. Unexpected lump sum expenses, external influences on retirement savings (e.g. adverse market movements) and regulatory changes must be considered.

It is good to have a trusted financial adviser who understands your retirement needs and can help you to make decisions about your investments in the future. We can help you through this process, so feel free to reach out to us.