Three rules of retirement planning: Build your savings, invest in assets, access government benefits

Key takeaways

• Strategies to build your retirement savings, such as well considered budgeting, investment diversification, and taking advantage of super benefits.

• How to earn passive income in retirement through property, shares, and annuities.

Retirement is a significant milestone in life. It should be a time when you can kick back, relax, and enjoy life, but to make your retirement years truly golden, it pays to have a well-considered plan.

Here, we’ll explore three rules of retirement planning that can help you achieve a financially secure and comfortable retirement.

Retirement planning rule 1: Build your savings

Savings are the cornerstone of a successful retirement plan. The sooner you start saving, the more time your money has to grow through compound interest. Here are some practical steps to get your savings on the right track:

• Set clear retirement goals – Start by defining your retirement goals. Consider the lifestyle you want to lead during your retirement years. Do you plan to travel the world, indulge in your hobbies, or simply enjoy a relaxed life at home? Knowing what you want will help you estimate how much you need to save.

• Create a budget – To save effectively, you must know where your money is going. Track your expenses and create a budget that includes savings goals. Identify areas where you can cut back on unnecessary spending and allocate those funds to your retirement savings. 

• Take advantage of super – Super can be a tax-effective way to build your retirement nest egg. Contributing regularly if you are in a position to do so (in addition to the compulsory contributions from your employer) to increase your retirement savings and take advantage of the tax concessions associated with super.

• Diversify your savings – Diversification is key to managing risk and achieving growth. Invest your savings in a mix of assets, such as shares, bonds, and cash. Diversifying your investments can help protect your savings from a downturn in one market segment while providing opportunities for growth.

• Save for emergencies – Life is full of unexpected twists and turns. To avoid dipping into your retirement savings for unforeseen expenses, create an emergency fund. Having a cash buffer for emergencies can keep your retirement plan on track.

Retirement planning rule 2: Invest in assets for passive income

While building your savings is essential, relying solely on your savings may not be enough to sustain you throughout your retirement. This is where investing in assets that generate passive income comes into play.

• Consider real estate – Investing in real estate, such as rental properties, or Real Estate Investment Trusts (REITs), can provide a consistent source of passive income. Rental income from properties or dividends from REITs can supplement your retirement funds.

• Invest in shares and dividends – Shares have historically shown strong growth potential. Invest in a diversified portfolio of quality shares that pay dividends. Dividend income can provide you with regular payouts to support your retirement lifestyle.

• Explore annuities – Annuities are financial products designed to provide a guaranteed stream of income during retirement. They can offer peace of mind by ensuring you have a steady income source, regardless of market fluctuations.

• Create a withdrawal plan – Once you’ve accumulated a substantial retirement savings pot, create a withdrawal plan. This involves drawing a predetermined percentage of your savings each year. This approach can help ensure that your retirement funds last throughout your lifetime.

• Seek professional advice – Investing can be complex, and the right asset mix varies from person to person. Consider contacting us to help you create an investment strategy that is compatible with your retirement goals and risk tolerance.

Retirement planning rule 3: Access government benefits

The Australian government provides retirement benefits and support services to help retirees maintain financial stability and security. Understanding and accessing these benefits is essential to maximise your retirement income.

• Age Pension – The Age Pension is a government-funded payment designed to provide financial assistance to seniors. To qualify, you need to meet certain age and residency requirements.

• Healthcare and other concessions – Retirees may be eligible for healthcare concessions, including subsidised prescription medications and reduced-cost medical services. Additionally, local governments may offer discounts on council rates and other services for seniors.

• Income support – If you have modest savings or investments, you may be eligible for income support payments from the government. These payments can provide a safety net for those who do not have significant personal savings.

• Keep up with changes in legislation – Government benefits and retirement-related policies can change over time. Stay informed about any legislative changes or updates that may affect your retirement income. Many government websites and services provide regular updates and information on retirement-related matters.

Summary

With a solid financial plan in place, you can look forward to a retirement filled with relaxation, adventure, and the peace of mind that your finances are secure. Remember, it’s never too early to start planning for your retirement. Seeking professional advice can be a valuable step in the right direction, so reach out to us today. 

* Based on KPMG Super Insights 2023 Report as at May 2023 KPMG Super Insights 2023 Report

This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at January 2024 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at mlc.com.au. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.