Retirement - How do I get there?

Retirement planning requires a proactive approach. It's not just about relying on your employer through compulsory super contributions to provide you with a comfortable retirement, although this will provide the younger generations with a greater headstart with compulsory super contributions increasing to 12% and having them paid from an early age.

Numerous surveys indicate that a single retiree needs approximately $40,000 p.a. to have a comfortable retirement and a couple need about $55,000 p.a. If you could get a 6% return on your super, a single retiree would need approximately $666,000 as a lump sum in super at retirement and a couple would need around $916,000 If you set these amounts as a minimum target they will be and are achievable the sooner you take some positive action to grow your investments in or out of super. Superannuation is the most popular vehicle to build your retirement nest egg because of the tax concessions provided by the government. This does not stop anyone from building investments outside of super which can contribute to your retirement.

There is a misconception that you have no control over what happens with your super and this creates a negative attitude with many people who end up relying partly or fully on the Age Pension because they have not done anything proactive about building their super. The truth is the government can and do change the legislation on a regular basis which may move the goalposts when it comes to contributions and tax. Even with the changes, super still remains the most tax effective vehicle for retirement and every super fund provides choices of investment options. Most people can also choose the super they want to use.

A higher income throughout your working life can make it easier to achieve a comfortable retirement but it does not stop a low income earner from achieving a comfortable retirement either if they take a proactive approach to building their super. There are many ways to boost your super for retirement. Let's take a look a few of the more popular ones.

1. If you are eligible, the government co-contribution scheme is a good way to boost your super. Even with the reduced co-contribution applying from 1 July 2012, it is still a 50% return on your investment. If you are not eligible, your spouse may still qualify.

2. Salary sacrifice is a great way to boost your super and save tax. If you earn more than $37,000 you will pay tax at 34% (including medicare levy) on income up to $80,000. Any income you sacrifice to put into super will reduce the tax rate to 15%.

3. Review your super fund. Fees and investment performance can make a big difference on the outcome of your retirement nest egg. Checkout some of the research houses like Chant West, Canstar or Super Ratings which can provide you with useful information on performance and fees.

4. Choose an investment option for your investment time frame. If you have more than 5 years before you can access your super then the focus should be on an investment option which will provide the best growth and income over that time. Don't be distracted by market volatility and switch your investment option every time there is a movement in the market.

These are 4 ways to help you achieve a comfortable retirement. My guide "10 Tips to boost your super for an early retirement" will give you more ways to achieve a comfortable retirement.


Rob Bourne has been involved in the financial services industry for over 35 years. As a practising financial adviser he focuses on the need for practical and down to earth financial education. The aim is to educate people through financial education so they can take control of their own financial future. Visit Rob's website here for more information on business opportunities, investing and financial education or the complete guide to superannuation a...

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