How much life is costing you in retirement?
This is the question I get asked very often by new clients, followers of this YouTube Channel or readers of my weekly Newsletter “How do I work out my expenses in retirement? How do I know if my spendings are within the limits or if I overspend?”.
The best way to be financially prepared for your retirement is to follow those steps:
1. Work out how much money you will have in your overall retirement savings
2. Organise your money with the view of maximising your income in retirement
3. Consider your long-term costs
4. Create a budget that is realistic but also that you will be able to stick to. Please watch the video, as I will explain how you can get access to the new calculator I have created to assist you with making the budget less daunting.
5. Track your spendings
So let’s go through those points of retirement costs, income and budget.
1. Work out how much money you will have in your overall retirement savings
There are number of calculators available on internet, you can find one on your superannuation side, on MoneySmart which is the government side. The unfortunate thing is that they are mostly limited to your superannuation savings, so you cannot include any out of super savings you might have such as cash or Term Deposits in your bank account, shares you might have listed with a broker, managed funds or any other investments. This is where a appropriate full advice form a financial planner can assist by putting all your financial assets together and calculating the expected value of your estate at any point in the future.
2. Organise your money with the view of maximising your income in retirement
This is exactly what my YouTube channel is all about and this is what I do daily for our clients. As you know there are number of income sources in retirement that you can benefit from such as:
- Account based pension – the most popular superannuation income stream and you can find lots of videos on my YouTube channel or articles on my website AboutRetirement.com.au explaining most aspects to consider of this type of an income stream.
- Annuities – a very popular income stream for retirement, and the one that finally makes a comeback. I would say that 70% of my retired clients have some savings in annuities set up for different reasons and different benefits. But most certainly one major benefit is possibly maximising your Age Pension, so if this is your goal, please book a meeting with me to run through your retirement income options.
- Investments outside of super such as shares, rental properties, fixed deposits
- Part-time work
- Age Pension – maximising this benefit should form part of your retirement planning.
- Selling your home (downsizing) or drawing equity from your home to support your living expenses.
3. Consider your long-term costs
Those are your later in life expenses, that you really should incorporate in your planning, and one of the major expenses would be Aged Care. I’ve already introduced couple of issues about Aged Care: “The biggest Aged Care mistakes to avoid” or “Lifetime Annuities and Aged Care Annuities”
4. Create a budget that is realistic but also that you will be able to stick to.
There is no point of working out the budget that is restricting you to the degree that you will not be able to implement into your life. But most people really dislike the budget, most people feel it is restrictive and a total waste of time. So I have decided to assist in this matter.
If you visit my website AboutRetirement.com.au , you head to News and then Resources, at the top of the page, you have calculators named: Retirement Spending Planner for couples or singles.
Choose the right calculator for your situation.
Write you name and your email address, as this is where you will receive the outcome of your planner.
Then enter you expenses per week into the calculator, which is divided into your Essential and Discretionary spendings.
Once you have completed the calculator, just click SUBMIT and in few seconds you will receive the email with the outcome.
And your outcome is the comparison of your budget and your spendings to those of ASFA for a comfortable lifestyle.
If you would like to know more about ASFA and their findings about the comfortable lifestyle in retirement, see: “Income required for a comfortable retirement”
5. Track your spendings
Now, after having done your budget, all you have to do is to keep the track of your daily spendings. If you are an Excel gig, you can do this on your computer or laptop using Microsoft Excel spreadsheet. If you prefer, you could use a commercial app that will track all your expenses as you go, there are number of those, but I am not going to advice on any particular, as it might be taken as a product advice, and I need to keep my videos limited to a general advice only, and any product advice is no longer part of a general advice.
I hope the budget calculator will assist you in comparing your expenses to those listed by AFSA. This is a very good exercise to show you if you are on track or you are spending far too much, or too little, in which case you could enjoy life a little bit more.
If you would like to make a booking with me to see how to organise your retirement and how to maximise your money for the best income level as well as security of it, you can also do this via my website.
By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement
