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When they retire, most people receive a government pension that is paid to all eligible taxpayers. The only trouble is that, with living expenses rising every year, many people are finding that on its own, a pension is simply not enough to be able to live on.
So how do you continue to make ends meet over a retirement period of possibly 30 years or more? This guide looks at the amount you’ll need, the plan to achieve it and most importantly, 8 ways to boost your income if you don’t have enough.
How much do I need?
The amount you will need to live on will depend on factors such as the age you retire at, the assets you have and the kind of lifestyle you want in retirement. The 3 levels of retirement lifestyle are:
Basic lifestyle – you own your own home and will be able to enjoy most of the basics in life without many extras. This lifestyle requires around $50,000 a year.
Well-off lifestyle – you have choices about extras such as holidays and discretionary purchases and can easily cover any health expenses that arise. This lifestyle requires around $100,000 a year.
Contribution lifestyle – you can enjoy a very high standard of living, with lots of choice and the ability to support your children and favourite charities. This lifestyle requires around $200,000 a year to maintain.
The ideal retirement plan
If you’re still a few years away from retirement, you still have time to ensure your nest egg is big enough.
Unlike a typical retirement strategy where you accumulate savings while you work and then gradually spend them in retirement, a better strategy is to build up your assets to the point where you can live off the interest they accrue.
These assets could include investments in;
Cash – fixed interest paid on a bank term deposit. This provides a low return but low risk (government guaranteed up to $250,000).
Bonds – you lend money to a company or government body in return for an agreed interest rate, which is higher for a company because of the higher level of risk.
Property – the most popular asset used to build wealth, this involves purchasing residential or commercial property and reselling when the value increases over time.
Shares – involves buying shares in companies and building wealth through dividends or the shares improving in value. Shares have the highest return but also the highest risk.
Boosting your retirement income
While building an investment portfolio is a great retirement strategy, it takes time to achieve and for many people, time is a luxury they don’t have. Retirement is looming or already a reality and they are facing an uncertain future with not enough money to live, let alone live well.
So what are the options? What other sources of income are available to top up the coffers in retirement? Here are a few ideas that might help,
Go back to work – rejoin the workforce, but this time on your own terms (i.e. flexible hours, part-time, casual work, consultancy or mentoring).
Start a business – this is the perfect time to turn a hobby into a paying concern. Whether it’s making toys or baking cakes, doing what you enjoy could earn you much-needed retirement income.
Apply for assistance – government assistance is available for a range of expenses, from mortgage payments and housing costs to ongoing health and medical costs.
Take in a boarder – if you have spare rooms in your home, taking in a boarder can earn you extra income from rent and assistance with utility bills.
Subdivide your property – if you have a large block, look into having it subdivided and selling off some land. You’ll need to check with the local council, but if successful, it could net you a sizeable chunk of cash for your retirement fund.
Sell your home – you could sell your home and downsize to a smaller, more affordable home. The profit might be substantial if you’ve lived in your home for a while and the value has gone up over the years.
Borrow against your home’s value – you could also borrow against any equity that’s built up in your property by getting a top-up loan or reverse mortgage.
Get rid of your debts – paying off your debts will reduce your expenses and if you can pay off your mortgage before you retire, this will provide a big boost towards your retirement finances.
These are just of the many things you could do to boost your income once you retire. As long as you still have your health, there’s no reason why you can’t generate a good income using all that free time you now have available.