Finance Your Budget Ask the Expert: Planning for a comfortable retirement and buying property

Ask the Expert: Planning for a comfortable retirement and buying property

Redundancy and retirement plans
Licensed financial adviser Craig Sankey answers your burning finance questions. Photo: TND
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Question: I’ve just turned 50, still have a mortgage and continue to work as hard as ever.

Much is said about retaining a comfortable level of income when planning for retirement, with superannuation integral to the process.

I was hoping you could explain in plain English how best to calculate what will be needed, any recommended reading, and simple strategies to boost super contributions (while continuing to pay the mortgage). 

You are correct in saying much has been said and debated about what is required for a comfortable income in retirement.

There are a number of well-publicised views, including ASFA’s retirement standard, which states that to live a ‘comfortable retirement’ single retirees need annual income of $43,901 and couples need $62,083 (as at September 2020).

To attain that income, ASFA says singles would need a savings balance of $545,000 at retirement and couples would need $640,000.

The Australian government has recently released the ‘Retirement Income Review’, which suggests you should aim for an income of between 65 to 75 per cent of your pre-retirement, post-tax, income once retired.

Both ASFA and the Retirement Income Review also take into account the role the age pension plays in supplementing your income.

However, both offer no more than general rules of thumb.

As everyone is different, I would suggest doing your own budget, analysing it for expenses that would no longer be applicable in retirement, such as your mortgage and work-related costs, and then adding in any new expenditure, such as additional travel or entertainment.

This will give you a solid understanding of the income level you should personally target. It can then be reviewed regularly and updated as your situation changes.

The Moneysmart retirement planner is a handy tool to work out how much money you are on track to have in retirement. This can then be compared to your target amount.

The calculator also allows you to look at ways to increase your income in retirement, such as by contributing more cash into super or retiring at an older age.

Moneysmart and SuperGuru have some good articles and tips on saving for retirement. And I would also suggest checking out what your current super fund provides in terms of education and calculators.

Many funds provide limited personal advice at no additional cost and a more comprehensive advice offering for a fee.

Question: Hi Craig, I am a newly separated mum not working but looking to buy a home (not as a first-home buyer.) I have just been bought out by my ex-partner and have approximately $250,000 to purchase another home but I haven’t got a job, I’m enrolled for a six-month TAFE course guaranteeing work at the end, and I’d like to take advantage of lower house prices.

Are there any options I can use to get a reasonable loan now, rather than having to wait until I have a job? I don’t want to whittle down my payout on rentals until I can afford a unit for my son and I.

Thanks in advance, Evie

As you have a sizeable deposit, some lenders will consider your application for a loan. However, they will look closely at what income you would have available, including any interest, Centrelink entitlements and spouse maintenance income, if applicable.

They would also want to look at your ‘guaranteed’ work after TAFE to see the specific terms.

I would highly recommend obtaining a pre-approval from a lender before looking at purchasing to ensure you are eligible for a loan. This will also tell you the maximum amount you could borrow from a lender.

I know you prefer not to rent, but banks and other lending institutions will be concerned if you are trying to take on debt without secure long-term income.

The worst-case scenario would be purchasing a home and paying all the associated costs, but then having to sell it in the near future in a ‘fire sale’, due to not being able to afford the repayments.

If you do have to rent for six months or so, it would not be the end of the world.

It may turn out to have some advantages, such as giving you time to find an appropriate place and obtain secure employment.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.  

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