If you are one of the many Australians who have their own self-managed superannuation fund (SMSF), you could be justified at feeling a little smug following the recent release of a report into what is considered a “comfortable retirement”. This report shows that couples over the age of 57 with a median balance in their fund can be reasonably confident that they will have enough funds to meet the comfortable retirement standard.
What is the comfortable retirement standard, and why is it important? This is a benchmark established by the Association of Superannuation Funds of Australia (ASFA), which estimates the annual budgets needed by Australians to fund either comfortable or modest standards of living in retirement.
These budgets are adjusted quarterly for inflation and it is assumed that the retirees own their own homes outright and are relatively healthy. They are important because they could be a window into your own future.
Figures for the quarter ended 31 December 2016 show that a single retiree aged 65 would need an annual income of approx. $44k, and a couple an annual income of approximately $59k to have a comfortable lifestyle in retirement. This lifestyle includes the expectation of involvement in a range of leisure activities, the ability to maintain a dwelling and purchase household goods, a reasonable car, nice clothes, private health insurance, electronic equipment and holiday travel.
A modest standard of living falls somewhat short of these criteria, still better than the Age Pension but with a budget that only allows for basic activities and requires tight controls on spending. SMSF trustees and members would certainly be hoping that by taking control of their investments via the fund, they could look forward to a comfortable retirement standard and not have to settle for a modest one.
As you can see, there is no room for complacency if you want the retirement lifestyle just described. Solid preparation now should deliver the future you want, but only if your fund is well-managed and has the benefit of sound financial advice delivered by licensed and qualified financial advisors.
One of the key benefits of starting your own SMSF is the ability to establish an investment strategy that is specific to your needs and future goals. Members of retail and industry superannuation funds have their contributions invested across a range of products, which may or may not deliver them the lifestyle they are expecting. Their future aspirations, and what would be needed to fund them, are grouped together with those of hundreds of thousands of other members.
When the administration of your SMSF is handled by a professional organisation such as SMSF Assure, your time can be better spent regularly monitoring your personal investment strategy. This is necessary to check if the current strategy is likely to deliver the funds needed to meet your future goals. It is this level of personal control that prompts many people to establish their own SMSF.
For a retirement lifestyle to look forward to, the comfortable retirement standard should really be the minimum goal amount. Many others looking to secure their futures agree, and the SMSF sector continues to expand as more of us take control of our retirement futures.