News
What’s FORO, and what can you do about it?
12 Jul 2024
5 min read
If you’re concerned about the cost of living, you’re not alone. Many Australians are feeling the pinch of increased prices in necessities such as food, housing, healthcare, and utilities. The Consumer Price Index (a measurement used to track the average change over time of goods and services) rose 3.6 per cent in the 12 months to April 2024, according to the latest data from the Australian Bureau of Statistics (ABS).1
While all age groups are potentially impacted by the rise in the cost of living, results from the latest Natixis Global Retirement Index show that 42% of participants were fearful that inflation is killing their dreams of retirement.2 Worrying about having enough to live on in retirement has even been named FORO – Fear of Running Out.
The average Australian is now living 20 years longer than 100 years ago.3 While this is good news, consideration must be given to what retirement will look like, how much is required to live the life you want, and how to balance that with the increases in the cost of living.
How much do you need to retire?
The AFSA Retirement Standard suggests to live comfortably in retirement, a couple aged around 85 would require $67,000 per annum and a single person of the same age, $48,000 per annum - these figures assume the retiree owns their home.4 You can view a full breakdown of the expenditure calculations.
To determine if you will have enough to retire, you can calculate an estimate of your total retirement income, including potential entitlements you may receive from the Age Pension and non-super investments. The NGS calculator can help you do this and also factor in super details for your spouse or partner (if applicable). Calculate your super savings.
To help prepare for a comfortable retirement, NGS Financial Planner Trudy Jenkins advises the following:
Create a super investment plan
Whether you’re about to retire or have already retired, understanding your financial goals may help determine how you choose to invest your super. This is also known as an investment strategy. In short, your super fund will invest the money that goes into your super savings account on your behalf with the aim of making you more money. Your super may go up or down in value over time depending on various factors including investment markets, and the way you choose to invest your super will impact your super savings. At NGS, we have a range of investment options – both pre-mixed and sector-specific – to suit various investment goals, timeframes and risk tolerances. Rest assured that if you are not sure which option to choose, we will automatically invest your super in our Diversified investment option, which has a track record of performance in line with its objectives.
Find out more about NGS' investment options.
What happens if you run out of super?
Planning ahead is always going to be the best way to improve your savings for retirement. The earlier you start focusing on your super savings, the better. However, if you do find yourself in a situation where you do not have enough super to support your lifestyle in retirement, there are some considerations.
The Age Pension
Australians 67 years and older may qualify for the Age Pension. You generally need to have:
Find out more about super and the Age Pension.
Returning to work
You may want to consider returning to work. However, your age, whether or not you have already started accessing super, and the Age Pension can affect your entitlements.
If you return to work once you have reached preservation age (preservation age depends on what year you were born), you may be restricted from accessing some of your super. For example, a 63-year-old retiree who has started accessing their super but then goes back to work will not be able to access any contributions made to their super after they have started working again, until they meet another condition of release.
Once you reach age 65, there are no conditions for accessing your super whether you choose to return to work or not.
The Work Bonus
If you decide to return to work after retirement, there is an extra government incentive. The Work Bonus is a scheme that supports those receiving the Age Pension by allowing them to keep more of their pension when they earn income from employment. Under the Work Bonus, a retiree can earn up to $11,800 per annum without it reducing their pension entitlement.
Find out more about the Work Bonus.
Let us help you
It's a good idea to speak to a financial planner to help you plan for retirement and what steps you may need to take to get there. A financial planner can:
- Discuss your goals for the short and long-term and help you reach those goals
- Help you understand the likelihood of being able to meet your goals and how long your financial assets may last through retirement
- Provide strategies and recommendations to assist you in maximising your entitlements
You can also speak with one of our Super Specialists. It's free, and they can answer your general questions about superannuation, investments, insurance or transition to retirement.
Seeking advice is a way to plan for your future, to mitigate risks and make the most of your saving opportunities. Education is integral to the planning process — it's important that you feel confident and informed at all times. Book your free chat with an NGS Super Specialist.
