Super Choices

Super Choices

For those of you who have been following my monthly articles, you’ll know I am passionate about about planning. If you’ve done this and you have been running a successful business have you thought about what happens at the end of this journey? Have you planned for what come’s next? Not wanting to disappoint my audience, this month’s article is about planning for retirement.

It is important to think ahead so that when you finally hang up the boots there is enough cash in the bank to fund a comfortable lifestyle that suits your wants and needs.

Scott Pape (the infamous Barefoot Investor) recently caused a media uproar when he said that couples need $1,000,000 in savings for a comfortable retirement.  This is out of the reach for the vast majority of us Aussies and basically says – “give up now, there’s no point trying”.

Given that most would agree a cool $1,000,000 isn’t a realistic retirement savings target, it is worth noting new guidelines developed recently by a group called Super Consumers Australia (a partner of CHOICE) based on ABS research on what Australian retirees actually spend – and the numbers are far more to my liking.   

These figures suggest a savings target of $302,000 for a single and $402,000 for a couple in a middle-income household, again with the important caveat - they don’t pay rent or a mortgage (i.e. they own their own home outright.

So with all these numbers being bandied around, the pressure is on to start planning and saving for retirement, while living in these crazy inflation times. 

When working with our clients our first questions are always focused on trying to understand what sort of life they want to lead in retirement and what their “number” needs to be.  Then we make a plan – see how I got us back to planning again!

We are then often asked if having A Self-Managed Super Fund (SMSF) is a good way to go.

Everyone’s circumstances are different so the answer is not a clear yes or no.  What I can do is share with you some of the considerations that you need to be aware of if you are thinking of heading in this direction.

Having your own SMSF absolutely gives you complete control over your money.  You have control of where you invest your money, you can decide what type of investments (shares, property etc) and even include your ethical choices such as sustainable projects. 

SMSF’s can be a useful estate planning tool and can be used to provide certainty for blended families. You can really supercharge your savings using an SMSF……..but it can come at a high cost.

There are very important compliance responsibilities you will have as the trustee of your SMSF. These investment structures are for the sole purpose of funding the retirement of members and are heavily regulated. If you set one of these up you have important obligations to keep very well organised records, and you will be audited every year and penalized if you don’t keep up with the red tape. You will need financial advice to setup a SMSF and you need to ensure the fund performs according to a documented investment strategy. All of this will cost money each year to manage, but if you know what you’re doing may pay great dividends!

Make sure you are thinking about all of this when you start looking ahead towards your retirement.

Andrew Freebairn

This information is of general nature only and is not intended as personal advice. It does not consider your particular investment objectives, financial situation and needs. Before making a financial decision, you should assess whether the advice is appropriate to you. We recommend you consult a professional financial adviser to assist you.