It appears set in stone that changes to the age pension will be happening in next month’s budget.
After some wavering, there was another fairly blunt speech from Joe Hockey last week where it was confirmed 70 would be the new retirement age, although “well into the future.”
Superannuation changes were also mentioned by the Treasurer, “as we have the proper debate about the age pension, we need to look at the role of superannuation and the preservation age.”
Although any potential superannuation changes were flagged to be likely something the government will go to the next election with.
Like I said previously, this will be one to impact the more limber citizens amongst us.
If you’re 35, or under, I’d guess you will have at least another 35 years of working to go.
So if you want to retire early, and if the superannuation preservation goalposts are shifted, you’ll need to be making allowances outside of the super system.
The good thing is if you’re young you have time on your side.
Most people have some regret about not saving earlier when confronted with the magic of compounding returns so here’s something to think about.
Since January 1970 a balanced portfolio has returned 9.9% per annum (pa), but for this illustration I’ll use a lower and realistic target of 6% pa.
Over 45 years if someone began saving 400 a month with an annual savings increase of 3% and achieved a 6% pa return, by the end of that 45 year period they’d have $1.69 million dollars.
Something to consider if you’re 20.
And something else to consider if you’re young – house prices.
Last week RP Data released figures showing Australian house prices are 7.2% above their previous peak.
Notably, Barclays’ research recently showed Australian household debt to disposable income ratios are at an all time high hitting 177%.
Remember to also weigh your borrowings and how much house you need vs. when you’d like to retire.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543, www.mfg.com.au This information is general in nature and readers should seek professional advice specific to their circumstances. Looking to reach your goals with one of Australia’s highly rated financial advisors?
