August 2017 – Adelaide Financial Advice

A recent global survey conducted by HSBC^[1] found that only 21% of working age Australians believe they will be financially comfortable in retirement!

In fact, the report suggests, of those surveyed,

58% believe they will have to work longer and continue working to some extent in retirement
75% were willing to defer retirement for two years in order to have a better retirement
65% are concerned about declining state pensions, like the Australian Age Pension because of mounting national debt and an ageing population.

This report paints a rather bleak picture of the future, not only for the baby-boomer generation, but also for Generation X (1966 – 1979), and Millennials (1980 – 1997).

The report sets out some practical steps when planning for retirement. While these are more directed towards the Millennials, I believe they apply to all generations:

Be realistic – start saving earlier, and save more
Consider different sources of funding – balance savings to spread risks and maximise returns
Plan for the unexpected – include worst case scenarios when planning
Embrace new technology – use online planning tools, and seek professional advice.

While on the topic of retirement planning, the Association of Superannuation Funds of Australia has just released its March 2017 Quarter Retirement Standard figures.

The March 2017 figures show a small increase in costs over the previous quarter’s figures. The factors that led to the most recent increases included petrol, medical services and electricity. Offsetting that were savings in international travel and accommodation, and fruit, with a small fall in clothing and footwear reflecting discounting during the post-Christmas sales.

The Retirement Standard budgets for March 2017 are:

	Couple		Single Female
	Comfortable	Modest	Comfortable	Modest
Weekly	$1,150.13	$668.45	$837.41	$465.07
Annual	$59,971	$34,855	$43,665	$24,250

So, my tips for those who are considering retirement in the foreseeable future;

Consider deferring retirement if possible – even if it means continuing to work on a part-time basis for a while
Understand exactly how much it will cost you to live in retirement – prepare a realistic budget, and account for contingencies (like new hot water system, or roof repairs)
Know what government benefits you are entitled to
Seek some really good financial advice from a financial planner experienced in retirement advice

As was highlighted in the HSBC report, starting to save earlier, and saving more, will be the secret to being best placed to enjoy the type of retirement you have always dreamed of.

^[1] Reproduced with permission from The Future of Retirement Shifting sands, published in 2017 by HSBC Holdings plc.

Source: Peter Kelly | Centrepoint Alliance

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I am going to look at home ownership from an older generational point of view.

For the majority of age pensioners, their home is the largest asset they own and in most situations the most expensive asset. The costs associated with owning a home are not minor, from council rates which can be quite high depending on where you live through to water rates, the ongoing maintenance and of course the yearly home insurance premium.

For a single age pensioner, with very little other income outside a full pension, these costs can prove quite high, but in all my years of talking to retirees, suggesting a person sell their home and downsize is normally met with a scowl and that this is not an option.
Why is it not an option?

For a large number of people, the house they currently live in has been their home for a lengthy period of time. It is where they have raised their children, it contains special memories or it could be the last place they lived with their spouse who has since passed away. Like their neighbours, they feel secure, they are comfortable with the task of travelling to their local shopping centre or their doctor is close by. Last but not least, if they have extra cash after selling their home and buying a smaller home would this affect their pension?

Accessing the equity in your home via a reverse mortgage could certainly be an option. But again the fear of making the bank your silent partner again, holding mortgage papers on your house can be a very daunting thought for an older single age pensioner.

Trying to educate and change a person’s mind and attitude who maybe in their eighties in relation to home ownership and the age pension is not easy. However, for a person in their fifties and sixties approaching their retirement, I believe this education and attitude change is a must, going into the future.

Source: Mark Teale | Centrepoint Alliance

Are you adjusting your retirement expectations?

Your Home – how attached are you?