How often do you check your Superannuation balance? Daily? Weekly? Monthly? Or never at all?
When I was working full time, I probably checked it once a year when the June 30 statement arrived in my letterbox. I guess in my mind, I saw the Superannuation Fund as “future money”, so I wasn’t at all concerned about day-to-day market movements. When I retired four years ago, without fail I started to log on every day to take a quick look at my balance.
I’d read the paper first thing in the morning and when it said the market had risen, I’d jump on to the website and delight in the extra money that was now funding a better retirement for me. When the market dipped, my mood dipped. In reality I don’t have day-to-day control of my Superannuation fund. My financial advisor does. But much to my chagrin, I found that the Fund’s rises and falls were affecting me like winning and losing affects a gambler.
After a while, my wife convinced me to only check the fund once a month. When I say convinced, I mean she banned me for looking at it on a daily basis. So, on the first of each month I log on and check the account. I keep a month-to-month register of both my wife’s and my Superannuation Funds and compare rises and falls on a monthly, and annual basis.
Often a bad month on the market might be offset by a better-than-expected annual comparison. Writing down all the ups and downs gives me the chance to find some kind of silver lining in any set of figures. I also keep track of our bank account balances and try to understand where, and how, we are spending money. It’s important to know what money you have; what your regular expenses are; and be able to anticipate your future financial needs.
Keeping a track on the finances somehow keeps me calm. That, and now fully understanding, and expecting, that my Superannuation Fund will more than likely have a lower balance in 12 months’ time than it does now. People like me who are drawing an income from their Super, need to understand that you are spending your nest egg – and it’s OK to see that nest egg getting smaller every year. Some people see a decline and over-react. They stop spending. Start buying pensioner meals and complain how small they are. And as a result, they stop living. Remember if you run out of Superannuation – and you are more than 67 – that you will always have the pension as a safety net.
Right now, for couples, that pension income is almost $43,000. I was chatting with my mate Raj this week about his finances. To say Raj is laid back is an understatement. Outwardly at least, he appears to be one of the most relaxed members of my circle of friends. His view on Superannuation is simple.
“Once all the money in the Super Fund has been spent, we will sell the house and downsize. I don’t
want to sell the house, but I’m also not ready to live like a pauper.
“I still want to go on holidays. I still want to be able to go out to dinner – probably to the Surf Club
rather than a five-star dining experience.
“In the end, there’s no point worrying about money in retirement. If you do worry too much you
might miss out on enjoying retirement.’’
Raj is right. It’s his money to spend how he likes. Raj doesn’t see that it is his job to make sure there’s enough money left after he dies to fund his children’s lifestyle. Sure, if there is any money left, it will go to his kids. But if there’s no money left. C’est la vie.
None of us know how much money we need in retirement because none of us know what our use- by date is. If you did know it would be so much easier to calculate how much money you could spend every month, week, day, or even hour. When it comes to that, the financial experts say that a single person who retires at 67 needs about $595,000 in Superannuation to fund a comfortable lifestyle. This figure is calculated on the assumption that you own your own home. When it comes to comfortable, it is assumed that a retirement income of $1000 per week should be sufficient for singles and about $1400 for couples.
For couples the retirement nest egg needs to be closer to $690,000 to provide you with an annual expenditure of $70,000. By 2028 there will be five million retirees in Australia. That’s about 18 percent of the predicted population.
Running out of money is one of the most common fears that retirees have. So, at the very least, all of us need to have some kind of financial plan that we work towards. You have to plan for things like buying a new car or jetting off on a three-week overseas holiday. Doing this – in detail – means that we better understand how much we can, and cannot, afford to spend.
It’s also important to take advantage of any seniors’ discounts that you may be entitled to use. Often, you can pick up a 10 percent discount simply because you have reached the ripe old age of 60. Remember that money is better in your pocket than someone else’s. And lastly, when it comes to your financial planning, the best advice given to me was don’t “set and Forget”.
Circumstances change. Opportunity comes and goes. Governments change pension entitlement rules; better investment options become available. At least once a year, sit down with your financial advisor – or do it yourself, and go through your finances to understand where you are spending money, and look for opportunities where you might save money.