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This article is the first in a mini series titled: ‘Traps to avoid in retirement’. This first article details the many choices you have in retirement once you can access your Super and the importance of making the right decisions.
Retirement: you’ve made it! And one of the rewards for all your hard work is that you can now access your superannuation. Suddenly a world of opportunities opens up – a Caribbean cruise, major home renovations or maybe helping your kids reduce some of their debt.
Of course you deserve to celebrate your retirement, but bear in mind that your super might need to support you for the next 30 years or more. Eat too far into your nest egg in the early days and you significantly reduce the time that your super will last. This is particularly the case in a low interest rate environment.
Take Ron and Val. They retire with a combined super balance of $800,000. At an interest rate of 4% pa this nest egg will fund annual living expenses of $60,000 for 19.4 years1. If they spend $100,000 on travel and home renovations and give a further $100,000 to their children, the reduced nest egg will now only last 13 years.
Planning for big expenses in retirement is just as important as it is pre-retirement. The longer that an expense can be deferred, the longer the money will last, and the greater the total income received.
In Ron and Val’s case, this might mean scaling back the travel plans a bit, putting off the renovations for a couple of years, and helping their kids by making regular, small gifts rather than a large lump sum.
Your super is there to help you enjoy life in retirement, but it’s a balancing act. A little restraint now may allow for more fun later, so talk to AGS Financial Group about how you can make the most of your super in retirement.
1 Does not take account of any age pension entitlement
AGS Financial Group Pty Ltd, ABN 70 093 990 946, trading as AGS Financial Group, are authorised representatives of AMP Financial Planning Pty Limited ABN 89 051 208 327 (Australian Financial Services Licence No. 232706). Accounting, taxation, and business advisory services are provided by AGS Accounting Pty Ltd ABN 12 166 728 696. AGS Accounting Pty Ltd is a member of Chartered Accountants Australia & New Zealand. Liability limited by a scheme approved under Professional Standards Legislation. Any advice on this page is general in nature and does not take into account your personal objectives, financial situation or needs. Accordingly, you should consider the product disclosure statement for any product and your own objectives, financial situation and needs before acting on this information and before acquiring a financial product. You can obtain a copy by contacting us on 02 9966 8188.
Financial planning, corporate benefits and mortgage services are provided by AGS Financial Group Pty Ltd ABN 70 093 990 946, an Authorised Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 (AMPFP), AFS Licence No 232706. Accounting, taxation, and business advisory services are provided by AGS Accounting Pty Ltd ABN 12 166 728 696. AGS Accounting Pty Ltd is a member of Chartered Accountants Australia & New Zealand. Liability limited by a scheme approved under Professional Standards Legislation.