ANDERSON Financial Planners

Most people look forward to a financially secure retirement. However, many of these same people have not properly prepared for retirement. Given the fact that people are living longer and healthier during their retirement years, it is prudent to understand what retirement will be like for those in the work force today and understand how they can prepare for a successful retirement.

SOCIAL SECURITY

First, realise that Social Security is not now, nor will ever be, a major source of income during retirement. It is unlikely that the majority of current income earners will be able to count on Social Security providing their retirement income.

Further, with the poor future prospects for the Social Security system in general, many may face higher taxation on that income and lower benefits. With fewer and fewer workers to support the system in the future, many project the system will be broke by the year 2027.

RETIREMENT LIFE

Half of all people who reach age 65 can expect to live another 18 years or more. Early retirement can make this even longer, requiring many to provide income for as many retirement years as they had work years.

Active retirees can count on needing at least as much income during retirement as before retirement. Why? Extra holidays and hobbies add expenses. Taxes are not likely to be less, and medical expenses are likely to be higher. All of this costs money; and the longer the retirement the more money it will take.

PERSONAL INVESTMENT

The average Australian family saves less than 5% of its income. In addition, many families invest in low-yielding bank accounts, debentures, or term deposits. These investments historically have not provided a long-term return above inflation.

Another mistake many make is to wait too long to start investing. For every ten years you delay in saving for your retirement, you will need to save three times as much to face future expenses.

What are the excuses people have for not starting now to save for retirement? Look below to see if you have used any:
In their 20’s:	I am young and have plenty of time to save for retirement. I just started a job and don’t have a great deal of income.
In their 30’s:	I have started a family and bought a new house. Cash flow is tight, I’ll save later.
In their 40’s:	I have a growing business and my children will be attending college. I can wait.
In their 50’s:	The children are getting married. I am helping my family establish themselves. I want to take a few holidays and join the golf/fishing club.
In their 60’s:	Retirement is here!

INHERITANCE

Since your parents face now what you will likely face in the future, do not count on having their estate pass on to you. They must stretch their retirement dollars to the maximum with the threat of rising taxes and medical costs.

In fact, parents often turn to their children and other family members for help. If they had only properly assessed the costs associated with retirement, they could have avoided these situations and remain independent.

NOW WHAT?

So now you understand that you are likely to have a long retirement with rising expenses. You also know not to expect to fund your retirement from outside sources. What can a person do?

In order to count on personal investments for retirement income, a person should start saving early. Save as much as possible. Determine your lifestyle and cash flow management system. Include an item for savings. If you get in the thrifty habit soon, it will last through retirement. As a starting point, save at least 10% of annual income.

The ravages of inflation are real and ever present. Since prices for goods will be higher in the future, your retirement savings should be in investments that grow above the inflation rate. With inflation at about 3% per year historically, bank accounts, savings bonds and term deposit investments do not help much. Investments such as property and equities trusts have grown at a much greater rate annually.

All investments have risk, however. Investigate the risk each kind of investment contains before placing money anywhere.

Saving for retirement will take all of your working years. In addition, you will have other financial goals that you will constantly try to achieve. In the end, will retirement be a choice for you? Or will you have to work longer just to get by?

If you would like a complete analysis of your goals, including retirement and how to reach them, contact Anderson Financial Planners

Terry Anderson, Scott Timperon, Christine Swanson and Peter Earl are

Authorised Representatives of

SECURITOR Financial Group Ltd

(A.C.N. 009 189 495) Licensed Dealer in Securities

Level 25, 91 King William Street  ADELAIDE  South Australia 5000

Disclaimer :

All content Copyright © 1998 ANDERSON Financial Planners
Level 2, 1 Hutt Street  ADELAIDE   South Australia 5000

Last modified: April 06, 1999