I'm glad you asked!

First, a few facts.

- Australia's superannuation system is the fourth largest in the world, and growing.   Pretty good for a country with an historically low saving rate.

- Total assets held in Australian super is worth 100% of annual GDP.   (Sorry, I can't find the report just now with those numbers, and why would you want to know that number anyway?)

- SMSF's are growing strongly, earn better than industry funds, and are evidence that businesses are taking responsibility for their retirement, not just saving tax.

How much do you need to retire - comfortably?

The Deloitte Accountants study in 2013 says a 65 year old, owning his own home, with around $350,000 in savings, needs an income of at least $23,000 a year (earnings from super $17,000, plus Centrelink $8,000).   The capital is likely to be fully spent within 12 years of retirement and that person becomes totally reliant on Centrelink.

A comfortable retirement requires earnings of $45,000, which needs savings of $600,000 (earnings from super $24,000, draw from capital $17,000, Centrelink $4,000).

"But I don't have that much!"

Because the super regime is still fairly young, the average capital in super for someone near retirement is under $100,000.   This means reliance in the future on Centrelink.   To get a pension, Centrelink applies the Asset Test and the (deemed) Income Test - whichever results in the lower pension is the one paid.

The answer?

These are a few steps to take:

1. Know what you want.   Decide on objectives - when will you retire, how much will you need each year (in detail; car, living, holidays, house, gifts, etc), are there other factors to consider.   Once we have the annual income needs number, using Tables and Reports of Earnings, we can calculate the capital needed to fund the earnings.   Takes less than half an hour.

2. Be aware businesses don't sell for big numbers, nor easily, so if you plan to sell your business to fund retirement, have a plan for sale in place in the 3 to 5 years before retirement date.   (If you need some guidance with this, ask about our Sale & Succession planning program).

3. Budget your cash flow each year so you make contributions to super, both concessional (which means tax deductible) and even non-concessional (or non-deductible) to increase the capital in your super.   (I consider that a Profit and Cash Forecast is probably the top management tool for a business).

4. Look closely at your investment strategy.   You need to improve earnings and look for growth opportunities while managing risk.   Good Retirement Planning is not about a financial planner selling you his preferred product to earn a commission, but providing a service at all these levels.   We can work with you on this and also provide an introduction to an experienced, capable professional planner.

5. Cover yourself against risk.   If you get hit by a meteorite know that your family still needs "the Plan", but won't have you, the business, or the time to put it together.   Buy insurance to ensure the result you want.   It doesn't cost much and it can be put through super (this has benefits as well as problems to consider).   Insurance can be sold by anyone, but we refer our clients only to an experienced professional, so please ask us for help with this.