23 May 2022
Expenses to consider in retirement
It’s no secret Australians are living longer, which means more time to enjoy family and leisure, and increasingly, more expenses to consider in retirement.
The average life expectancy at birth is now almost 81 years for men and 85 for women, according to the Australian Bureau of Statistics. It’s a significant jump from the start of the 20th century when both sexes were only expected to live into their early 50s.
One consideration that comes with increased longevity, however, is increased pressure on the hip pocket. Due to growing price pressures in addition to general living expenses, people in their later years of life are often fearful of outliving their savings, especially if they want to maintain their standard of living while in retirement.
With that in mind, here are a few expenses that you may need to factor in for the years ahead.
It’s difficult to predict what the future will hold or even how you’d like to spend your retirement years. For example, some people end up travelling frequently, while others spend more time looking after grandchildren. It’s usually a case of the more, the better, if you want to give yourself additional freedom and options.
As we get older our lifestyle expenses are often replaced by increased medical expenses. It is only natural that we experience an increase in physical ailments, resulting in more visits to doctors and specialists. We’re also likely to spend more money on medicine. Health insurance and government safety nets can be helpful but having some cash aside for unexpected medical costs is also prudent.
Aged or home care
Needing a bit of extra assistance is a reality for many older people. Having extra money put aside can significantly increase the level of choice you have. For example, if you wish to continue living in your own home but need a bit of additional help, it may be worth investigating and budgeting for extra assistance.
Few of us want to think about our own funeral, but it’s also something you probably don’t wish to leave to loved ones to fund. Putting aside some extra funds can help take that pressure off loved ones. There are different options in budgeting for funerals, so please speak to an Active Super financial planner. *
All of these expenses can be catered for by putting additional money into super allowing you to take advantage of compounding interest. Compounding means you receive interest on both your principal investment and your interest. In other words, you earn interest on your interest. Over time, these incremental interest injections can accelerate the rate of return on your initial investment with the effect increasing the longer you’re invested. The longer the investment horizon, the higher the amount of compound interest.
Whether you’re 35 or 65, it’s never too early to start thinking about what you’ll need in the future – and creating a plan for how you’re going to get there.
Contact us to find out more about strategies and objectives that suit you.
This article is general in nature and not a substitute for personalised financial advice.
* Active Super financial planners can provide financial advice, at an additional cost. When you first meet with your planner they will discuss and assess your needs. If a fee is payable for the advice you require, you will be advised of the associated cost. It will then be entirely up to you to decide if you would like to proceed any further.