Is it too late?
Updated: Aug 16, 2019
Sometimes we are contacted by potential clients with very little savings or investments. It’s often a result of divorce or circumstances that have prevented them from saving for their retirement. Sometimes they are self-employed and have put everything into their business or just didn’t have anything ‘left over’ after paying for living costs. They are now in their 50s, their working life is finite and retirement suddenly looming.
The question is “is it too late to make a difference?”
The answer is “it depends”. It depends on the individual client, their motivation and discipline. Even if you are in your mid 50s with very little saved, a 10-12 year time frame (and a good attitude) can make a very real difference to your lifestyle in retirement. And no, you don’t need $1m to make a difference.
The way our government pension scheme is structured in Australia encourages SOME investments to supplement the government pension safety net.
A 10-15 year time frame can make a real difference to the quality of lifestyle and spending in retirement.
The MAXIMUM age pension for a couple who own their own home is about $36k pa. While it is generous to have younger taxpayers funding this, it’s not a lot to live on! It is however, a fantastic base to add additional income from a superannuation pension.
For a couple, you can get a maximum pension and have assets (not including your house) of $387 500. For most people, this means that you can have up to $350k in super, own your own home and still qualify for a full pension. That is pretty generous.
Your income increases 40% to over $52k pa from $36k and can make a huge difference in enjoying your retirement. That sounds great, but how do you make it happen?
There are some government policies that can help: the co-contribution payment ($500), spouse contribution (tax rebate of $540) and tax-deductible personal contributions. What is needed however, are three things - commitment, budget and discipline.
Even if your existing balance is looking a little behind where you would like it to be, it’s not too late if you have a plan and are committed. For example, if you are 52, have $100k combined in super, earn $50k pa you would need to make an additional $100 pw salary sacrifice (before tax) to get to approximately $300k at retirement age. Of course, the longer you leave it, the larger the contributions are required.
We’re happy to run the numbers of what might be required and do a ‘what if’ scenario. After all, you are planning for the 25 year long holiday!