Steak dinners or two-minute noodles: your future, your choice

Steak dinners or two-minute noodles: your future, your choice

By Guest Blogger Paul Feeney, Founder, Map my Plan

Imagine you had two options for your retirement lifestyle.

Option 1: Your days are full of activities and classes. You regularly meet up with friends for an evening out, or entertain at home over good food and a few good bottles of wine. You wear clothes you like, get your hair done when you want to, and go on one nice holiday a year – probably within Australia, although some years you make it overseas.

Option 2: You can’t always afford to do the things you want to do – whether that’s taking a regular class or eating out once a week. At home you might not be eating two-minute noodles all the time, but sometimes that’s all your budget allows. You take one or two short breaks a year but it’s usually to a local caravan park, or a motel out of season.

You can see the difference. But what if I told you actions you take now could mean the difference between one and the other?

These scenarios come from the ASFA Retirement Standard, and they’re examples of the different lifestyles you might be able to lead in retirement on certain incomes.

National figures released in December 2015 show that, in general, a couple aged 65 looking for a ‘comfortable retirement lifestyle’ (option 1) will spend $59,236 a year. For a ‘modest’ lifestyle (option 2), that same couple would be on a budget of $34,226 a year.

In reality, there are many different possible lifestyles – and how you choose to spend your money is up to you. But the bottom line remains the same. A ‘comfortable’ retirement is going to cost you more – and if you want to continue to live the way you do now, you’ll need a plan to fund it.

As boring as it may sound, I’m here to tell it to you straight – if you sit down and do some planning now, you can make a real difference to your quality of life in retirement.

Adjust your expectations

Younger workers tend to have an unrealistic idea of when they’ll be able to stop working – with a study by Deloitte Access Economics showing early career employees on average expect to retire at age 52. At the same time, 70 per cent of Australian workers won’t be able to retire when they want to because they don’t have enough super and savings.

With longer life expectancies and inadequate savings, it seems many of us need to adjust our idea of when retirement should happen.

Putting a plan together can help. Even if you end up having to work much longer than you’d like, you’ll feel more in control of your future if you have a realistic end goal in sight.

Reaching a retirement plan

A good retirement plan takes a variety of factors into consideration, such as your:
  • Current age
  • Planned age of retirement
  • Expected income until retirement
  • Planned contributions to your super and any other investments, for the rest of your income-earning years
  • Estimated rate of return on superannuation and other investments, and when you can access them
  • Other sources of retirement income, and whether they are fixed or varying
  • Planned retirement lifestyle, including the costs of leisure activities, travel, housing and healthcare.
Use online tools like MoneySmart’s Retirement planner to get an idea of how you’re setting yourself up for retirement now. Don’t be alarmed if there’s a gap – it’s better to know now as any small changes you make – like forgoing bought lunches and using the money you save to make extra super contributions – can make a big difference to your future.

Don’t believe me? If you sign up to create your own free, personalised financial roadmap at Map My Plan, you’ll be able to play around with our Retirement scenario tool (in the Saving for Retirement goal on your dashboard) and project out the impact of any extra regular payments you make now on the income you’ll get in retirement.

You can dream about all the steak dinners you want, but the lifestyle you lead in retirement depends on steps you take now.
About the Author
Paul Feeney is Chief Mapper at Map My Plan, a free online financial planning tool that helps Australians take control of their financial future.

Keep an eye out for more details on a CGU sponsored webinar by Paul Feeney coming soon!