We've all got to face up to it – one day we'll be 60 and thinking about money and retirement (unless of course we're lucky enough to have made an early break for freedom...)
We’ve all got to face up to it – one day we’ll be 60 and thinking about money and retirement (unless of course we’re lucky enough to have made an early break for freedom…). The thing is, there are so many variable circumstances that navigating the post-60 threshold can seem a little intimidating to those of us who only pay a passing interest to the state of our financial affairs. Even if we aren’t necessarily thinking about downing tools as soon as the sun rises on our 60th birthday, it’s certainly the decade when words and phrases like ‘investment portfolio’, ‘Superannuation Scheme’ and ‘Age Pension’ cement their places in our everyday vocabulary.
Let’s start by looking at what you really need. What do you need money for? Is it holidays? Is it the unfortunate bankrolling of your offspring’s latest trip to Europe? Is it to safeguard your spouse’s future? Maybe start by looking at whether you want to carry on working, and the impact that will have versus the money you’ve already saved over the previous 40-odd years. Can you afford to retire? Whichever way we look at it, hopefully there won’t be too many of us forced into a scenario where we end up struggling to make ends meet.
There are several revenue streams that should be in the forefront of anyone’s money management in their 60s. Even if your main source of financial stability has vanished into an ether somewhere, perhaps due to a job loss or an investment collapse, recent research published by Financial Review suggests that if you are single and own your own home, then as a rule of thumb AUD$20,000 should be enough to survive on.
This is good news, as the single person Age Pension in Australia right now comes in annually at $21,913 (including a Clean Energy Supplement). Couples can expect around $33,036. Now, if you’re reading this you might be firmly into your 60s, you might just be curious, or maybe on the cusp of reaching sexagenarian status. If you’re reading this now, in July 2014, and you’re 60, unfortunately it’s going to be another SIX YEARS until you reach your age threshold.
Tables which detail the discrepancies in pension age can be found here, as it very much depends when you were brought into the world.
The news gets worse the later you were born, with the recent budget announcement by Joe Hockey meaning that if, for example, you’re 48 and reading this, it’s going to be another 22 years before you can get your hands on the Age Pension.
However, it’s unlikely that the majority of the population are simply relying on Age Pension to see them through. Remember that Super you started paying into when you were a fresh-faced intern? Of course you do, you’ve been counting the days until you can get your hands on it! Well, hopefully that should have matured quite nicely – and obviously if you’re 60 you get to withdraw that tax-free as a lump sum, as a regular income or spin it off into another pension scheme for sometimes attractive tax breaks. Also, if you happen to have amassed a portfolio of investments worth AUD$1m, excluding the value of your family home, even then you may still be entitled to a part-pension.
I suppose managing finances in your 60s is really about working out what sort of retirement you want – what are your later life goals? What do you need to live on to have the quality of life you deserve? Do you even want to retire at 60? Life expectancy is going up all the time, with the average life expectancy now standing at the ripe old age of 82 according to AIHW. Which, depending on your circumstances, begs the uncomfortable question… will you have enough to last you 22 years?
Image by Ambro