Retirement Planning for Australian Millennials

It’s a fact that Australian millennials face a different economic world than their parents and grandparents did. Student loan debts and the high cost of everyday living can make it difficult to pay for the necessities like rent, let alone save for something as far away as retirement. 

The great news for millennials is that time is on your side. Every little bit you save now will have many years to grow before you need it for your living expenses. But that means you should start planning now for the future. With conscientious retirement planning, millennials can begin building their wealth now so they can enjoy retirement when the time comes.

When to Start Retirement Planning

Retirement planning can start as soon as you get your first job. Your employer is required to send a portion of each paycheque to your super fund, so you may as well have a plan for investing that money.

For most people, planning for your retirement may not be a priority in your 20s. However, the sooner you begin saving, the more time your money has to grow. Compounding is a powerful wealth-building tool, and the most important ingredient for compounding is time.

In your 20s, you probably aren’t earning as much money as you will earn later on. But if you sacrifice a little more than is required by law, you will be much better off during retirement. In fact, those early sacrifices might make it possible for you to retire early.

How Do I Start Retirement Planning?

Planning for retirement can seem overwhelming while it’s still so far off. After all, retirement is decades away, and you may have no idea what your life will be like then. But if you save diligently now, you’ll have many options available to you as your retirement draws closer. On the other hand, if you fail to plan for retirement, your options will narrow.

Start planning for retirement by deciding on an amount to save for. The ASFA Retirement Standard estimates that single people will need about $43,000 per year and couples will need approximately $60,000 to have a comfortable retirement. For a more modest retirement, ASFA recommends around $23,767 for singles and $34,216 for couples.  Your desired lifestyle is extremely personal: what’s comfortable to you might be nearly intolerable to another. You need to assess what kind of lifestyle you’d like to have during retirement, as the above figure re a guide only and are fairly conservative. 

You’ll also need to think about when you plan to retire. People who wait until age 67 will need less savings than those who want to retire at 60. 

Using these calculations, you can come up with a ballpark savings figure. Don’t forget to calculate inflation and any hidden costs you may need to include, such as travel, relocation expenses and medical bills.

With your ballpark savings figure, you can determine whether or not you’ll need to sacrifice additional salary on top of the standard super requirement.

A wealth management adviser can help you to work through these calculations and answer any questions you have about planning for retirement. Remember, the earlier you start saving, the more time you’ll have for your money to compound.

Millennials are in a fantastic position to create the retirement of their dreams. Contact us at Altus to learn more about retirement planning.