Are My Parents on Track for a Comfortable Retirement?
As you move through your 30s and focus on your own financial planning, it’s natural to think about your parents’ future as well. Many parents of those in their 30s are approaching retirement age, making this an ideal time to check if they’re on track for a secure and comfortable retirement. Here’s how you can help your parents review and optimise their superannuation to ensure peace of mind in their later years.
Why super planning matters for your parents
Superannuation is often a primary source of income during retirement. Ensuring it’s well-managed and sufficient is crucial for their financial stability and long-term comfort. By supporting your parents in evaluating their super, you can help safeguard their future.
Steps to support your parents' super
Setting Retirement Goals
Help your parents define their vision for retirement by discussing questions such as:
- When do they want to retire?
- What kind of lifestyle do they wish to maintain?
- Are there major plans, like travel or home renovations, to consider?
Establishing clear goals will provide direction and a basis for planning.
Project Possible Retirement Income
Determine how much income your parents might have at retirement by following these steps:
- Gather key information:
- Current super balance
- Current income
- Use the Moneysmart Superannuation Calculator to estimate their potential retirement savings.
- Review the projected income to see if it aligns with their retirement goals.
Compare to Retirement Standards and to the lifestyle they want to live
Compare the projected retirement income with established benchmarks like the ASFA Retirement Standard:
- For a comfortable retirement at age 67:
- Couple: $690,000
- Single: $595,000
This standard provides a good retirement, covering necessities such as groceries, transportation, home maintenance, private health insurance, leisure activities, and occasional dining out. It also allows for occasional domestic and international travel. This budget assume that the retiree owns their own home outright.
- For a modest retirement at age 67:
- Couple: $100,000
- Single: $100,000
This budget slightly exceeds the Age Pension, covering essential health insurance, occasional leisure, and social activities. It assumes retirees own their home outright.
Assess how their expected savings align with these standards and their personal retirement goals.
Putting Super Strategies in Place
If there’s a gap between their retirement goals and expected income, consider strategies to bridge it:
- Boost Contributions: Encourage voluntary contributions. They might also be eligible for co-contributions through government schemes.
- Consolidate Super Accounts: Simplify management and reduce fees by merging multiple accounts (please ensure to check how this might affect your insurance first).
- Review Investments: Ensure their super fund’s investment strategy aligns with their risk tolerance, goals, and retirement timeline.
Book a free 1:1 super health check with a legalsuper Client Service Manager
Whilst you can offer significant support, professional help is invaluable. legalsuper provides free personalised assistance and can help your parents navigate this process, enabling them to make informed decisions that will result in a secure retirement.
Encourage them to reach out to legalsuper for tailored, professional 1:1 guidance today.
The above information refers to information published in the Association of Superannuation Funds of Australia Ltd (ASFA) Retirement Standard
All figures in today’s dollars using 2.75% AWE as a deflator and an assumed investment earning rate of 6 per cent. The fact that the same savings for a modest retirement are required for both couples and singles reflects the impact of receiving the Age Pension.
Note: The lump sum estimates prepared by ASFA take into account the receipt of the Age Pension both immediately and into the future. The Age Pension is adjusted regularly by either the increase in the CPI or by a measure of wages growth, whichever is higher. The ASFA lump sum figures are therefore not updated quarterly.
