RETIREMENT PLANNING - NEW APPROACH
Many of us are sailing toward retirement with the hope that the pension, personal savings and superannuation will add up to the magic sum required to enjoy our remaining years with a reasonable lifestyle.
But how to reach that goal can be a bit of a mystery. We all know we should be saving for retirement, but how much should we be squirreling away?
And how much will we need if we live to 90? And how can our income in retirement be protected against inflation?
The answers are available, and Intelligence is not the issue; it really is a question of knowledge and time. Retirement planning as it is currently administered is in a transition phase; it simply doesn't represent a sustainable solution for most of us.
What we see in the current crisis, is the tendency to talk only about return and forget risk. Risk means risk, not just a wink and a nod. 'It will all work out in the end' is not a supportable claim.
In “Pride and Prejudice”, Jane Austen didn't describe Mr. Darcy by saying he was worth 100,000 pounds. She'd say that he was worth 4,000 pounds a year. That's how we usually think of our standard of living.
We're used to thinking of the superannuation industry as a vehicle for getting to our retirement goal, yet few of us have a deep understanding of the mechanics behind it.
It's like compression ratios on car engines. Or dual overhead camshafts. What does that mean in terms of what matters to me? Does it get me more mileage?
In the same sense, what you're really worried about is your standard of living, not what's under the hood in terms of the rate of return distributions to get you to that goal.
To get us started, I ask my private clients to nominate their desired annual income in retirement. If they are not sure, I suggest a target to maintain one's standard of living is around 70 percent of your annual income earned in the last few years of your working life.
They are then asked to input the minimum amount they would feel comfortable living on. (Whatever the answer is to this question, it provides an insight into their risk tolerance).
Then over the years, we can adjust for factors such as increases or decreases in salary and take into account explicitly the risks of changing life expectancy, inflation, and interest rates.
We have your goal in mind and suggest what investments will achieve the target vision to get you there.
An you know my solution – residential real estate.
I'm not saying it can't be done better – I anticipate making continuous improvements.
So stay tuned. Retirement as we know it is an evolving concept. For one person it may be the classic vision of a retirement village on a golf course. For another, it could be a few years in the Philippines with your religious affiliation.
However the only known product that will continue to grow, is inflation protected, and hopefully will last until your “estate event” is Property.
Let me know if you would like me – Bernard Kelly - to help you explore your options. Contact me on admin@retirelaughing.com or just hit the return button on this email.Labels: income in retirement, pension, retirement, superannuation |
