For most Australians, the approach of retirement is something to look forward to. Yet it can also be a time that fills us with trepidation. After all, we’ve saved for it, worked towards it, but are we really prepared for it?
How much do you know about retirement planning?
Take our quiz and find out.
Q1: How much savings do you need to retire?
A. About $500,000 for each person in your household.
B. It depends on what you plan to do in retirement.
C. Enough to pay off your mortgage.
The answer is … B. It depends on what you plan to do in retirement.
There is no exact lump sum amount required to retire as the final amount depends on:
- The lifestyle you choose to live
- How you spend your money
- Future lump sum requirements (car, caravan, boat, kids house deposit etc)
- Market returns and the longevity of life.
For example, some clients are happily retired on the Government Age pension plus savings of $200,000. Others are happily retired on $4m in savings. According to data from ASFA, you require ~$62,828 pa for a comfortable retirement or ~$40,829 pa for a modest retirement.
Q2: At what age can you access your superannuation to retire?
A. From 60 years of age
B. It depends on your date of birth
C. From 55 years of age
D. From 65 years of age
The answer is … B. It depends on your date of birth.
|Your date of birth||Age you can access your super (preservation age)|
|Before 1 July 1960||55|
|1 July 1960 — 30 June 1961||56|
|1 July 1961 — 30 June 1962||57|
|1 July 1962 — 30 June 1963||58|
|1 July 1963 — 30 June 1964||59|
|After 1 July 1964||60|
There are other conditions that affect when you can access your super. You can read more about them here.
Q3: Which of the following statements is true in relation to low interest rates?
A. Low interest rates result from a high demand for finance.
B. Low interest rates aim to encourage saving.
C. Low interest rates aim to encourage spending.
The answer is … C. Low interest rates aim to encourage spending.
We have just been through this exact situation with the COVID-19 pandemic. Interest rates all over the world were reduced to encourage people to spend to keep people in jobs to restore confidence in uncertain times.
Q4: Is it possible to outlive your retirement money?
A. Retirement investments are designed to last a lifetime.
B. We’re all living longer, and we need to plan ahead.
C. It doesn’t matter – that’s what the pension is for.
The answer is … B. Yes. We’re all living longer, and we need to plan ahead.
Medical improvements are extending the average life span. Returns from markets, lump sum spending, gifts to children, sticking to a budget, changes in lifestyle will all determine how long your money will last.
Q5: Which of the following is a benefit of transitioning to retirement, over age 60?
A. You could pay less tax.
B. You’re no longer required to contribute to super.
C. It reduces reliance on retirement savings.
The answer is … A. You could pay less tax.
From age 60, drawing a transition to retirement pension, is tax-free, however, the earnings in the super fund are still taxed inside super until you convert the transition to retirement pension into an account-based pension.
Q6: Which is NOT a concession specifically designed for retirees?
A. SAPTO (Seniors and pensioners tax offset)
B. Family tax benefit
C. 0% tax rate for account-based pension.
The answer is … B. Family tax benefit.
This is specially designed to assist families with children.
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General Advice Disclaimer
This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or Sentry Advice Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.
Paradigm Strategic Planning Pty Ltd is an Authorised Representative of Sentry Advice Pty Ltd AFSL 227748