What Size Retirement Fund Do You Need?
Mercury Wealth Management
Business Insurance, Investment Loans, Loan Calculators
When your retirement is due in the next two or three years, you can perhaps see how much money you are going to need over the next few years to provide your monthly retirement income. The problem lies with the more distant future. As you cannot possibly have any idea about the rate of inflation and the value of your currency against other world currencies, it is impossible to know what income you will require in 10, 20, or 30 years time.
You can make your best guess using all of the available information from your business, the government, and anyone whose thoughts on the future you are prepared to give time and listen to; perhaps your investment advisors. Despite all the best advice you can receive, the final responsibility of knowing whether you can afford a selection of annual holidays abroad each year or whether you’re going to struggle to purchase a newspaper at the weekend, is down to you.
***Spending Versus Income -
There are two ways you will deal with your money after you retire and the longer you have to plan towards a retirement date, then the better opportunities you will have to reach the size of retirement fund that you would ideally require.
Even if you can’t be exact, you can take some best guesses at the level of income you will require each year into the future with another best guess at the average rate of inflation that will take down your spending power over time, so perhaps your income needs to be increasing by that certain percentage each year.
You’re going to spend money during your retirement. You are going to need to maintain your property and perhaps purchase a new vehicle every 3 to 5 years. You will need to have enough funds, growing at least at the rate of inflation, to protect yourself and keep available the available capital you will require at any stage.
***Do You Sell Your Home? -
Many people believe they will downsize their property around their retirement date. This is not a true science. Most people working today have seen at least one recession hit their business and the financial markets. House prices have fallen considerably in many areas of the country and it takes time for them to return to their previous values. In some areas, property can retrieve their financial losses in one or two years while other areas are seeing property only back to their previous highs over a 7 to 10 year period.
If you need to sell your property when you retire to provide part of your retirement fund, you cannot guarantee the value of your property at that time and in fact you may not even be to sell your property if it’s during a recessional period and the banks have stopped lending mortgage money again.
Talking to financial advisors is extremely useful. It’s wise to look at your options and take advantage of information that a financial planning professional can provide. If you need help looking at your retirement, talk to Mercury Wealth Management. We have Victoria and Melbourne financial planners with a wealth of knowledge who would be happy to help you crunch some numbers.
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