We live in a time and age where working has taken a different turn. Most people opt to retire early. In the current generation, retirement is no longer about age but it involves having ones budget and liabilities on hold, understanding what resources one has and how to manage them. Here are answers to some of the frequently asked questions about retirement.
- 1. How much super do I need to retire?
- 2. How much should I save to retire?
- 3. When should I start saving for retirement?
- 4. How do I start saving for my retirement?
- 5. How much do I need to save so I can retire financially secure?
- 6. What is the Age Pension and how do I apply for it?
- 7. What are the advantages of the Age Pension?
- 8. When do I receive the benefits of Social Security?
- 9. What are the types of retirement plans available?
- 10. Which is the best retirement plan?
1. How much super do I need to retire?
Make sure you can afford. Retire when you are emotionally fit to quit your jobs, when you feel the need to be your own boss and being in control, when you have health complications, you are financially stable and when you age.
2. How much should I save to retire?
The amount of money you need to have depends on the age that you want to retire at. This is made possible through the use of a calculator. The calculator takes into consideration various factors including: One’s current age, Retirement age, The investment pattern whether it is low, risk or high risk, Life expectancy, estimated average inflation rate, returns from investments and portfolio size. It however does not include securities held. A retirement calculator or a financial adviser will help you calculate this.
3. When should I start saving for retirement?
Start saving upon realization that you need to retire early. Keep saving having in mind that saving rewards. It doesn’t mean that you have to start big to save, start small increasing the savings with time. Come up with a saving strategy and stick to it having set goals. Analyze your retirement needs and the estimated amount. One needs a minimum of 70% of the pre-retirement earnings for the lower earners while 90% or more is required once one stops working to maintain living standards.
4. How do I start saving for my retirement?
Contributing to one’s employer savings plan is a noble idea which would mean lower taxes. Learn about your employer’s pension plan and inquire whether you are covered by it or not. Request an individual statement to analyze the benefits you will gain. You can also find out whether you are included in your spouse’s savings plan. Factors such as Inflation and investment type play a role in determining the savings at retirement. All this is aimed at reducing risks and improving returns. A good saving plan entails restricting from using the money otherwise one bears the risk of penalties or losing tax benefits. In case one needs to change the job one can roll the savings over to the new employers saving plan or invest in an Individual Retirement Plan (IRA)-either traditional IRA or Roth IRA, which provides better tax advantages.
5. How much do I need to save so I can retire financially secure?
How much money one should be saving depends on their paycheck. This is better done by analyzing ones expenditure and allocating a certain percentage for saving every month. A rough estimate of 15% of the gross earning is advised to be allocated to retirement for a good retirement scheme. If you are not saving, you can opt to contribute to your employers saving scheme then develop a personal plan later. The use of a retirement fund is another option. Getting a financial planner will help you budget and know the savings. Savings should especially be done during early years to see higher savings.
6. What is the Age Pension and how do I apply for it?
Social security is a system or the Age Pension, that offers pay out if you invested in it while working. It works by using money paid via tax deductions and sending it out to those enrolled. You can apply for Social Security retirement benefits around the age of 62 years and 72 years. However it only works if you have reached the retirement age which depends on the year of birth. Applications can be made through the phone or the Social Security Offices.
7. What are the advantages of the Age Pension?
In Australia the present situation exists to support people from their retirement age, via the Age Pension. The advantages of this are The purpose of any retirement plan is to provide income after retirement. An employer can offer his/her employees a supplement pension that serves as a token of appreciation thus improving the business by attracting and keeping competent employees.
8. When do I receive the benefits of Social Security?
You can access the retirement benefits in case need arises mostly from as early as 62 but the total amount one will receive at the end will be less than the expected amount. For example , If your retirement age is 66-the reduction age at 62 years is 25% and at 64 it is about 13.3% this shows a decreased rate as one nears their retirement age.
9. What are the types of retirement plans available?
Two main categories are: Defined contribution and Defined benefit
Defined contribution plan-It entails an allocation formula that specifies a certain percentage of compensation to be contributed by a participant by allocating a certain percentage of their salary before taxation and allocating it to the retirement plan.
Defined benefit plan-It allocates a preferred level of benefits to be paid on retirement. It uses a fixed monthly payment or a percentage of compensation; the employer then contributes to this plan yearly ensuring the benefits are always available upon need. Annual contributions depend on factors like salary, age, interest rates and inflation rates.
10. Which is the best retirement plan?
You should opt for a plan that provides lower taxes and higher income. An eligible candidate can have a traditional IRA(Individual Retirement Account) and a Roth IRA. The choice depends on:
Investment choices available-Large companies and corporations limit their investments choices to bonds and mutual funds which also applies to smaller companies but the difference is that they give more options to choose from.
Investment charges: the fees charged to the investment plan
Client’s accessibility-A good retirement plan puts into consideration the need to access the savings before the expected time. Individual Retirement Account can be accessed any time however the amount withdrawn cannot be paid back to the IRA.
Availability and Professional Investment Management Cost-A client who is unable to properly device an investment plan should consider services offered by a professional.
Other factors to consider include: Age and retirement pattern, the purpose of funding the retirement account among others.