Retirement is a life-changing event. After you stop working, you can
find yourself with time to do the things you may not have been able to do
before, like travelling, volunteering or spending more time with family and
As you adjust to this new lifestyle, you’ll also need to think
differently about your finances. In retirement, your priority typically
changes from saving, in preparation for when you leave the workforce, to
carefully spending those hard-earned savings. It’s likely that your initial
focus will be to find a way to replace your salary or wage with cash flow from
The composition of your retirement income
requires careful planning.Your retirement income may come from more than one source.
The age pension is an income support payment offered by the Government
to older Australians who meet the relevant eligibility criteria.
maximum payments of
$22,211.80 per annum for a single pensioner and $33,488.00 per annum for
pensioner couples (current for the period 20 September 2014 – 19 March 2015),
the age pension probably won’t be enough to afford most people a modest
post-work lifestyle of basic activities, let alone a comfortable lifestyle.
afford even a modest lifestyle in retirement, many people will need to
supplement the age pension with other income. This could come from an annuity,
an account-based pension or other investments.
An annuity (from within or outside
annuity is a simple, secure financial product that guarantees a series
of payments, for a fixed term or for life, in
return for an upfront investment. The earnings rate is fixed at the outset, and
this applies for the length of the annuity, regardless of share market
movements or interest rate fluctuations. Capital can be returned at the end of
the agreed term or gradually during the term of the annuity as part of the
An account-based pension (from your super)
An account-based pension is an investment account which gives you the ability to choose from a range of investments with the level of income you wish to draw subject to the minimum annual withdrawal amounts set by the Government. Account-based pensions are usually market linked. This means that the capital value is linked to the performance of the underlying investments, which can impact the level and duration of your savings and the income produced.
are just some of the types of investments that can sit within your super fund
(personal or self-managed superannuation fund) or outside superannuation.
Â· Term deposits are fixed term, fixed interest savings accounts. Terms generally range from one month to five years.
generally pay income in the form of dividends. You can invest in shares
directly or via some managed funds (or account-based pensions)
investment property is real estate which has been purchased with the
intention of earning a return on the investment, either through rent, the
future resale of the property, or both.
from various sources can be ‘layered’ to meet your income requirements. This
can be set up so that more secure income, such as from the age pension or an
annuity, can cover your essential costs of living, while your income from other
sources can fund your discretionary spending.
approach can also allow your more growth-oriented assets to remain invested,
giving them time to grow.
each person is different, there is no single retirement income solution. More
than one investment strategy and product may be required so it’s important to discuss
your options with your financial planner. After all, it can make all the
difference to your financial success in retirement.