OverSixty July 2023 Digital

OVERSIXTY.COM.AU | ISSUE 5 | JULY 2023 15 YOURMONEY Follow these basic rules for retirement to ensure you remain in a comfortable !nancial position for years to come Photo: Supplied YOUR MONEY Retirement funds – howmuch is enough? BOB NIXON YOUR MONEY M any people, up to 60 per cent, enter retirement fearing they will run out of money. Yet, 50 per cent of all retirees spend less than the Age Pension equiva- lent. Provided adequate planning is tak- en, retirement can be a positive experi- ence for all of us. Moreover, given that we are living longer (at 65 a male will live for another 19.9 years and a female will live for a further 22.5 years) we need to plan as wewould plan a road trip and regularly review that plan. !e fear of running out of money is a direct response to the retiree not know- ing what their spending will be in retire- ment. So howmuch is enough? What you need is linked to your lifestyle immedi- ately before retirement. Your lifestyle is re"ected in your spending pattern and can be a very simple exercise – reviewing your bank account(s) and identifying to- tal cash out"ows and in"ows. As a gen- eral rule of thumb a retiree requires 7-10 times their #nal salary to maintain his or her standard of living in retirement. !e Association of Superannuation Funds of Australia (ASFA) release quar- terly data on retiree expenditure. For the September 2022 quarter, annual ex- penditure for a couple wanting a com- fortable lifestyle is $68,014, and $44,034 for a modest lifestyle. For a single retiree, annual expenditure is $48,266 for a com- fortable lifestyle and $30,582 for a mod- est lifestyle. !is data is for retirees aged between 65 and 84 years. AFSA state that the superannuation balance required to maintain a comfortable lifestyle for a cou- ple is $640,000 and a single is $545,000. !ese superannuation balances assume that the retiree will draw down all capital and receive a part Age Pension. !e as- sumed investment earning rate is 6%. Collecting a Centrelink Age Pension is not a crime as our welfare system is well placed to support people in their retire- ment. Having a small pensionwith access to the ‘card’ is worth having and together with a reasonable retirement savings bal- ance will facilitate a comfortable lifestyle. !ere are some basic rules for retire- ment so let’s explore some of the more fundamental ones. DEBT Do not enter retirement with any debt. If you are entering retirement with a mortgage on your principal place of res- idence then look at downsizing to pay o$ the mortgage while still remaining in your desired location. !e same applies to credit card debt – maintain a low limit and pay o$ the balance each month. DOWNSIZING Downsize or relocate while still #t and ac- tive. Don’t wait until the decisionbecomes all ‘too hard’. Moreover, it will liberate cash to allow you to enjoy retirement. !e other advantage of downsizing is that individuals over age 55 can now con- tribute up to $300,000 of proceeds that have resulted from the sale of a principal residence held for at least 10 years. For couples the amount is $600,000. !ere is no upper age limit. Continued on page 16 About the author Î Bob Nixon, Founder and MD of Nixon Financial Services, has 50 years experience in the Financial Services industry, specialising in assisting people in their wealth creation, retirement planning and personal risk protection. Bob is a member of the Association of Financial Advisers and a Life Member of MDRT, the Premier Association of Financial Professionals®. Bob Nixon and Nixon Financial Services Pty Ltd are authorised representatives of Sentry Advice Pty Ltd AFSL 227748. Our #nance expert reveals howmuch you really need to retire comfortably