There are few situations where contributing money to super is a bad idea, with concessional tax rates and an investment that becomes largely, if not entirely tax free when you retire. The major downside is that funds are locked up until at least age 60.
I met a client this week in this exact scenario – they have followed the path – worked hard, paid off the mortgage and then contributed every spare dollar to Super. He was now 50 years old and ready to retire, but with no access to a Super, how could he financially support himself if he stops working? Does this mean he must keep working until 60?
Possibly, but can planning help avoid this scenario?
The financial concept of retirement is ‘replacing’ your employment income with income from your super fund, but unfortunately, in this case, the replacement income will not be possible for 10 years, which means either continuing to work or retiring with a far more conservative lifestyle for the next 10 years – neither particularly attractive.
Most people simply aren’t aware how they are tracking towards their retirement – are they exceeding, meeting or behind their goals? Without this information, they keep doing the same thing, hoping it works out.
If a client is tracking toward having the assets at stop work at 50, great, but you want to know this at age 40, not age 50, when you’ve already closed that door with poor investment choices.
Retiring at 50 is a lofty goal, requiring long-term planning, often segregating part of your wealth outside of super into bucket 1 and part inside super into bucket 2.
How much in each bucket? If I had a crystal ball, I could tell you, however one of the amazing features of super is that there are ample chances transfer any leftover from bucket 1 into bucket 2 at age 60!
