A New Reality for Millennials

Millennials in Australia have a different retirement landscape to previous generations. The age you can access benefits or superannuation varies depending on the year you were born. With rising costs of living, debt and longer life expectancy, financial providers can assess your situation and offer solutions. Individual circumstances such as income and personal situation also play a big role in retirement planning. Instead of leaving the workforce entirely, more Australians may find themselves working well into their golden years.

How Much Do You Need to Retire Comfortably?

According to the ASFA the current benchmark for a comfortable retirement is around $52,085 per year for singles and $73,337 for couples.

But for millennials 30-34 the average super balance is between $46,289 and $56,344 – a long way off from long term retirement goals. Different financial sources such as investments, savings or inheritances can contribute to achieving these goals. But with inflation, rising interest rates and housing pressures many young Australians may not accumulate enough to sustain the retirement lifestyle they want.

It’s also important to understand super contribution limits and the implications of exceeding them. Exceeding these caps can result in extra taxes and impact retirement planning.

Why Retirement May Be Out of Reach

Debt and Living Costs

Student loans, mortgages and credit card debt makes it harder for millennials to prioritise retirement savings. Effective strategies to pay off debt are essential. Increasing costs for housing, healthcare and essentials leaves little room in the budget for super contributions.

For retirees thinking about their travel options the implications of car ownership are big. Deciding whether to keep a car especially if driving is expected to decrease in retirement can impact overall financial planning.

Understanding the fees associated with super accounts is key. Consolidating multiple accounts into one means paying only one set of fees – a big consideration for retirement planning.

Longer Life Expectancy

Australians are living longer than ever. Good health is key to a successful retirement as it can impact retirement timing and overall financial stability. A longer life is a good sign of better healthcare but it also means a longer retirement to fund. Without enough savings this extended period can be financially stressful. As we age we need to budget for healthcare expenses which will increase over time.

It’s important to factor in potential higher health care costs as we age and consider government assistance programs that can help cover these expenses.

Priorities

When planning for retirement it’s important to set priorities to ensure a smooth transition to your post-work life. Consider what matters most to you in retirement such as:

• Travel and Exploration: Do you want to see the world? Planning for travel can be a big part of your retirement strategy.
• Spending Time with Family and Friends: Retirement can offer more time to connect with loved ones. Think about how you want to spend this time.
• Pursuing Hobbies and Interests: Whether it’s gardening, painting or learning a new skill having time for hobbies can enrich your retirement life.
• Maintaining a Healthy Lifestyle: Staying active and healthy is crucial. Consider how you’ll fit in exercise, healthy eating and regular medical checks.
• Continuing to Work Part-Time or Starting a New Business: Many retirees find fulfillment in part-time work or starting a new venture. This can also provide additional income and keep you engaged.

Setting priorities will help you focus on what’s important and make informed decisions about your retirement strategy. By aligning your financial planning with your personal values and lifestyle aspirations you can create a retirement that’s both fulfilling and financially secure.

Retirement Income

Retirement income is the money you receive during your retirement years, typically from a combination of sources such as superannuation, pensions, investments and government benefits. Understanding your retirement income is key to planning a comfortable and secure retirement. A well thought out retirement strategy should consider many factors including your retirement age, preservation age and annual income requirements.

Remember individuals can only access a certain amount of their superannuation each financial year.

Retirement income can come from:

• Superannuation: Your super fund can provide a regular income stream in retirement through an account-based pension or annuity. This is often the foundation of retirement income for many Australians.
• Pensions: The Age Pension is a government benefit that provides a regular income stream to eligible retirees. It’s a safety net for those who may not have enough superannuation or other savings.
• Investments: Investments such as shares or property can provide a regular income stream or a lump sum payment. Diversifying your investments can help manage risk and ensure a steady flow of income.
• Government Benefits: Government benefits such as the Age Pension can provide a regular income stream and other forms of support to help cover living costs.

You need to consider your retirement income options and create a personal retirement plan to ensure a comfortable and secure retirement. By understanding and planning for these various income sources you can better manage your finances and achieve your retirement goals.

Sustainable Retirement Income

A sustainable retirement income is key to maintaining your lifestyle in retirement. Consider the following to create a sustainable income stream:

• Superannuation: Review your super balance and consider consolidating multiple accounts to reduce fees. Your super fund can provide a regular income stream through an account-based pension or annuity.
• Investments: Diversify your investments to minimize risk and maximize returns. Consider a mix of shares, property and other assets to ensure a steady flow of income.
• Government Benefits: Check your eligibility for the Age Pension and other government benefits. These can provide a regular income stream and help cover living costs.
• Annuities: Consider purchasing an annuity to provide a regular income stream. Annuities can offer financial security by guaranteeing income for a set period or for life.
• Part-Time Work: Continuing to work part-time can supplement your retirement income and keep you engaged. This can be a flexible way to transition into retirement while maintaining financial stability.

By creating a sustainable retirement income you can have enough money to enjoy your retirement without worrying about running out of funds. Planning ahead and considering all available income sources will help you achieve a comfortable and secure retirement.

Government Benefits and Support

Government benefits play a big role in supporting retirees especially those who may not have substantial superannuation or other savings. Understanding these benefits and how to access them can make a big difference to your retirement income. There are also free resources and services available, such as a free helpline for inquiries regarding benefits and free webinars that provide guidance on financial planning and retirement.

Superannuation and Investments

Superannuation and investments are key components of a retirement strategy. Consider the following:

• Superannuation: Check your super fund and switch to a low fee fund if needed. Consolidate multiple super accounts to reduce fees and simplify management.
• Investments: Diversify your investments to reduce risk and increase returns. A balanced portfolio with low and high risk assets can help you achieve your retirement goals.
• Risk Management: Invest in a mix of low and high risk assets to balance your portfolio. This will help manage risk and provide opportunities for growth.
• Fees: Be aware of fees associated with your super fund and investments. High fees can eat into your savings over time so switch to a low fee option if needed.

By managing your superannuation and investments well you can grow your retirement savings and achieve your retirement goals. Regularly review and adjust your strategy to stay on track and make the most of your money.

Estate Planning and Insurance

Protecting Your Assets

Estate planning and insurance are important to protect your assets and look after your loved ones when you’re gone. Estate planning involves having a will, power of attorney and a trust. These will ensure your assets are distributed according to your wishes and your family is supported.

When managing financial assets like shares and investment properties consider the impact on retirement income, taxes and government benefits when deciding to sell these assets.

Rethinking Retirement: Slowing Down, Not Stopping

For many the solution won’t be stopping work altogether but rather slowing down. Thanks to technology we can now work remotely, part-time or freelance well into our later years. This transition can provide ongoing income without the demands of full time work.

Having reached a stage in life where slowing down is an option this can also help bridge the gap between what’s saved and what’s needed while still having time for lifestyle, travel or passion projects.

When retiring individuals face challenges such as adjusting to a new routine and managing their finances to sustain their retired life.

Lifestyle Expectations Are Changing

Millennials value experiences—travel, dining, entertainment—as much as, if not more than, physical possessions. But these lifestyle choices come at a cost. Many get used to a high standard of living and when the time comes, adjusting to a modest retirement income may be a challenge. This highlights the importance of financial planning that aligns with personal values and lifestyle aspirations, including where you choose to live in retirement. Planning where to live can impact the quality of life and standard of living in retirement making it a key part of your overall financial strategy.

Also there are various supportive elements beyond government benefits such as health care discounts available through concession cards and other things that can enhance financial security for individuals in retirement.

Set a Retirement Date

Setting a retirement date can be daunting but it’s essential to plan for your post-work life. Consider the following when setting a retirement date:

• Retirement Age: Check your preservation age and consider retiring at 60 or later. Your preservation age is the earliest age you can access your superannuation and it varies depending on your birth year.
• Super Balance: Check your super balance and see if you have enough savings to retire comfortably. Assessing your super balance will help you determine if you need to boost your contributions or adjust your retirement plans.
• Government Benefits: Check your eligibility for the Age Pension and other government benefits. These benefits can provide a regular income stream and support your retirement lifestyle.
• Health and Lifestyle: Consider your health and lifestyle goals in retirement and plan accordingly. Your health can impact your retirement timing and overall financial stability so it’s important to factor this into your planning.

By setting a realistic retirement date you can create a plan to achieve your retirement goals and enjoy your post-work life. Take the time to consider these factors and make informed decisions and a smooth transition into retirement.

Start Now: What Kind of Retirement Do You Want?

The first step to preparing for the future is visualise the retirement lifestyle you want:

• Do you want to travel frequently?
• Are you planning to downsize?
• Will you work part-time or volunteer?

Once you have a clear picture a financial adviser can assess your financial situation to help you develop a strategy to make it happen.

Deciding on key actions related to retirement planning is crucial to achieving your goals. This could involve:

• Boosting your super contributions
• Investing in shares or property
• Budgeting more effectively
• Income protection and retirement products

Also talk to your financial providers about any outstanding debt and have conversations with your partner or friends about your retirement priorities to prepare for the future.

Plan for a Comfortable Future

It may seem scary but the reality is with early action and the right advice millennials can achieve their retirement goals and have a plan that supports financial stability and lifestyle satisfaction.

Even if “retirement” looks a little different in the future financial freedom is still possible.

There are also programs to help entrepreneurs succeed and resources for those starting and running small businesses.

Let’s Plan Your Future

At Insight Wealth Planning we help individuals plan for a retirement that matches their lifestyle goals. Our services include retirement planning, superannuation advice and guidance on age pensions. Whether you want to retire early, ease into semi-retirement or work on your terms our advisers can help you create a realistic, achievable and tailored plan for your future. Get in touch today.