We are not talking handbags or anything pretty here. Instead we are talking about the fear of becoming a bag lady and living on a park bench in extreme poverty.
To some people this is a rational thought, to others it’s a bit far fetched.
But should we live with this fear? Unfortunately to some degree, YES. The statistics tell us that we should probably be doing all we can to try and plan for a comfortable retirement, or risk living in poverty or at least close to it in our retirement.
Today, 70 per cent of single, retired women rely on the full age pension of approximately $22,000 a year.
Only a small proportion of retired women live on incomes above $50,000 and more than half have incomes of less than $30,000.
So what can we do to reduce the risk of living in poverty at retirement?
- Start saving early – it all adds up. The power of compounding means that even the smallest of monthly contributions can make the world of difference to your retirement outcomes.
For example, if you contribute must an extra $50 a week to super from the age of 33 to the age of 60, you would have an extra $350,000 in super on retirement which is enough to pay yourself an extra $150 a week until your mid 80s. Now you may not have an extra $50 to contribute, but even $20 a week will make a significant difference to your retirement outcomes.
- Consolidate your super. This will reduce your admin fees, and keep you focused on growing and monitoring the performance of one fund only.
- Provide your tax file number (TFN) to ensure you are not being levied with additional taxes. If you have not provided your TFN to your super fund you risk being taxed at the highest marginal tax rate, which is 47 per cent on your contributions instead of 15 per cent.
- Protect your income with insurance. This can come from your take home pay, where it is tax deductible, or from your superannuation, if you do not have the cashflow to fund it from your pay.
- It’s never too late to start focusing on your super. Spend some time learning how much super you are likely to have at retirement and the steps you can take to try and increase it. A Retirement Income Calculator is a good place to start. This one on the money smart website is easy to use. Give it a try.
