Planning for your retirement is very different from normal everyday financial planning.
Common everyday financial planning involves planning to achieve our personal goals, such as, planning for an overseas holiday, a house or home unit, an investment property, upgrading to a bigger residence etc.
Our personal goals are generally centred around our wants as opposed to our needs.
A “need” is something that you have to have such as food. It is something that you cannot live without.
A “want” is something that you would like to have. It is not essential but it will improve your standard of living. For example, you want to eat out at a nice restaurant once per week.
A comparison of other “wants” and “needs” are highlighted below:
Needs Wants
A car A European car
A holiday An overseas holiday
Clothes Designer label clothes
A home for shelter To buy an apartment rather than rent. Or to buy a larger home.
When planning for our future retirement we need to first analyse our needs. How much money do we “need” in retirement to fulfil our basic standard of living. Clearly in retirement we will be earning less than in the prime of our career. We may be dependant on passive investment income, as we may not be working at all.
Once we can quantify the value or cost of our needs we can better assess how much we need to accumulate prior to our retirement.
For example, if you need approximately $1,000 per week you would need in excess of $700,000 in accumulated investment assets including superannuation (but excluding your home and lifestyle assets such as furniture and cars etc.) If you need approximately $1,500 per week then this amount increases to $1,100,000.
The above illustration should give you an indication of whether you need to save more or cut back on your discretionary spending or both
Should you require any information please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.