Retirement planning Australia sounds like an oxymoron, because this country is a land of "milk and honey" and out national approach is "she'll be right, mate!".
Similarly, retirement income Australia is something that is never spoken about, but as half of us will be living to 90+, we're all going to need additional sources of income over the next 20-25 years.
Now, given that we all know that superannuation is seriously flawed, in my experience, only residential investment property can do that, in particular in Queensland over the next two decades, and even more precisely, the south-west suburbs of Brisbane is likely to be more successful than elsewhere.
Simple planning, even if you're in late career, can ensure a comfortable retirement
Over the years, I have helped many couples in late career rescue their retirement with my successful strategies for retirement planning Australia. And my first suggestion is to buy a school exercise book at their local supermarket.
Then we open it up, and mark it into four sections: (1) your finances (2) your health (3) family & friends and (4) your zest for living. Actually, we leave about the first third for Finances, because that is the most complicated, and because money gives us options.
Then we progressively fill each section with random thoughts - althought they aren't really random thoughts, as they are thoughts that have been supressed for years.
Catch this short video about my overall philosophy - about property, about retirement, and how to buy investment property. Then come back here to continue your exploration of options possibly available to you.
We've all realised by now that the goal of superannuation - to become self funded retirees - is impossble for probably 95% of the population, because the 9% compulsory contribution can never be enough. It's a simple mathematical exercise to prove that retirement planning Australia, as we currrently know it through superannuation, has failed. In other words, we need an alternative to our woeful national savings program.
A similar scheme has been operating in Singapore since the 50s, however the difference is that every worker must contribute 20% - from the very first day in the workforce. The result is that they can retire on 80% of their pre-retirement income.
But as our politicans are loath to admit mistakes, and don't want to cause widespread concern (or invite demands for a higher pension) all this is left unsaid. John Howard, as Prime Minister, froze the contributions at 9% whereas the plan that Paul Keating introduced included 1% annual increases until 15% was reached.
So today the average balance for a couple in late retirement is around $100,000, which is likely to be consumed within two years. Hence the need for continuing support from Canberra, even though government expenditure on social welfare (and defense and on health, and on education etc) will soon cripple it. So be prepared for Uncertainly.
Which is one of the reasons why I suggest that you should avoid financial planners.
We'll all like to continue with the same income, and so if a couple in late career is now bringing home $80,000 you'll want much the same, particularly in the early years. This has to be factored into retirement planning Australia, and built into the new skills set that you need.
To achieve this from superannuation, and have a nest egg left for the children, you'll need around $1,600,000 in your super fund, and on the assumption that it earns 5% pa., that's your $80,000.
Alternatively, if you want to spend every last penny yourself, you'll only need around $900,000 as you would then take 4% from the principal each year - that's $36,000 - plus the 5% earnings on $900,000. That will give you an income of $81,000 but beware, your super will be exhauseted in 20 years using this method.
However, a major problem with both strategies is that superannuation funds are not protected against inflation, and your purchasing power of your income is likely to be halved in 15 years.
The solution to retirement planning Australia, and having adequate financial income throughtout our later years is to develop a portfolio of residential investment property.
These hardly require any contribution from you while you are still working, they are protected against inflation (because the rent will increase) and when you pick a location that will deliver capital growth, you'll retire laughing.
If you're just starting out, or adding to an existing portfolio, focus on the ideal tenant (a young couple with kids in primary school),the ideal investment product (an off-the-plan family home) and the ideal location (the south-west suburbs of Brisbane).
But you don't need any sophisticated financial engineering, so stay away from self managed super funds. The only beneficiaries with that approach are solicitors and accountants.
PS - a parallel strategy to boost your immediate cash flow would be to take whatever hobby you have and convert it into a "profitable hobby".
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I'm Bernard Kelly, Australia's Retirement Strategist®
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