How to avoid difficult financial decisions in your 3rd Act
Have you set a savings target for your final superannuation benefit? If you haven’t yet, you’re not alone. Many people don’t know the approximate dollar figure their super benefit...
Have you set a savings target for your final superannuation benefit?
If you haven’t yet, you’re not alone. Many people don’t know the approximate dollar figure their super benefit must reach for them to enjoy a financially secure 3rd Act.
What if you don't know either?If you don’t know what your super savings target figure is, your final super benefit may not be enough. We can’t say for sure, of course. But we can say that not knowing how much super you need to save does increase the possibility your super will fall short of the mark.
So what if your super does fall short of the mark?That’s when you may need to make difficult decisions. You may need to make difficult decisions to ensure you live within your means in your 3rd Act. For instance, you may need to make some decisions – if you think your super won’t fund your desired lifestyle – to ensure your lifestyle does in fact cost less than the income you get from super and any other sources.
What kind of difficult decisions could you have to make?There are generally three decisions to consider making if you are a recent retiree who suddenly believes their level of income from super is not hitting the mark.
These decisions are to:
- Delay your 3rd Act for a year or two to increase your final superannuation benefit and therefore your level of income from super
- Lower your lifestyle expectations so your cost of living is less than your income, or
- Working part time or casually to increase your level of income.
Interestingly, some people do choose to continue working in their 3rd Act, spending one or two days each week in a part-time or casual job.
And guess what? You may choose to work in your 3rd Act too. But if you feel you must work, or you must reduce your standard of living, you’ll probably have a difficult decision to make…
So how can you avoid making difficult decisions in your 3rd Act?There’s one thing you can do today to help avoid difficult decisions later on. And that’s to think carefully about a savings target for your final super benefit. And luckily you don’t need to spend hours budgeting to do this. You can do something much simpler instead…
You can view ASFA’s standard for a comfortable retirementASFA is the Australian Superannuation Funds Association, the industry body for super funds and their members. ASFA’s website reveals (for free) how much money singles and couples may need to spend each year in retirement to enjoy a comfortable retirement (or 3rd Act).
Of course, these figures won’t be specific to your 3rd Act.
But viewing these figures will help you to get started, which will put you ahead of many people who don’t know how much super they need to enjoy a financially secure 3rd Act.
This 3rd Act article provides general information only. It has not taken account of your personal objectives, financial situation or needs. Before acting on any general information or advice, you should have regard to your own objectives, financial situation and needs.
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