March has arrived, and with that the weather starts to cool; this brings a fresh chapter and a chance to set your pace for the months ahead.
February delivered mixed signals for the Australian economy.
Labour market conditions were steady. The unemployment rate held at 4.1%, with 18,000 more people employed in January, driven by a rise in full-time jobs and partly offset by a fall in part-time roles.
Wage growth continued to edge higher, up 0.8% in the December quarter and 3.4% over the year, while household spending softened.
Inflation was slightly higher than expected, with CPI remaining at 3.8%, and trimmed inflation (the RBA’s measure of underlying inflation) increasing to 3.4%, up from 3.3%.
Reporting season added its usual volatility to the share market and the ASX hit several record highs towards the end of the month.
The Westpac–Melbourne Institute Consumer Sentiment Index fell further by 2.6% to 90.5 in February, impacted by February’s cash rate increase.
The Australian dollar strengthened, largely due to global risk sentiment, hitting a three-year high of USD 0.71 by month’s end.
5 steps towards a financially fit retirement
If retirement is just around the corner, the current financial climate may make you feel a little uneasy. Watching the markets fluctuate might leave you worrying about whether your superannuation will be enough to see you through.
It’s not a time for hasty moves, though.
If you are concerned a calm review of your current portfolio and investment strategy may be helpful.
After all, the average Australian spends around 20 years in retirement, so it’s important to create a retirement strategy that takes account not only the current market conditions but also the risks and opportunities in the years ahead.
As one of the most significant retirement assets, your superannuation needs a carefully considered assessment as you approach any new life stage.
Here are five useful tips to help ease you into the next chapter towards retirement.
1. Review your risk profile and portfolio allocation
Check your super portfolio’s risk profile. Generally speaking, investors take a high-growth approach when they’re younger to take advantage of higher returns, however, as with normal share market cycles, there will be fluctuations in the share market. Having a long-term strategy gives you the time to recover from any market downturns before retirement.
Older investors may prefer a more conservative investment strategy that can help to stabilise returns by potentially protecting super from share market volatility.
2. Calculate retirement expenses
Be realistic about the living expenses you’ll need when you finish working. For some, it may cost less to live in retirement because of reduced expenses such as commuting costs and maintaining a work wardrobe.
On the other hand, you may plan to travel more or buy a new vehicle or renovate your home, so these expenses need to be factored in when working out how much you’ll need.
According to the Association of Superannuation Funds of Australia (ASFA), the annual average budget to maintain a comfortable lifestyle in retirement is $73,077 for a couple and $51,805 for a single person.i
And to maintain a modest lifestyle, ASFA estimates a couple will need $47,470 and a single person will need $32,897. Both estimates assume you already own your own home.
You can find easy-to-use tools on the MoneySmart website to help you work out your budget and also estimate your income from super and the Age Pension.
3. Take action on mortgages and loans
Entering retirement with manageable or small levels of debt can contribute to feeling more financial stable.
If you’ll still be repaying a mortgage after you’ve retired, you could consider downsizing your home or using superannuation funds to pay down the debt, keeping in mind the tax implications and ensuring that you comply with superannuation laws. If you’re considering either of these courses of action, we’d be happy to explain your options and obligations.
4. Check your timing
Understanding when and how you can access your super is important.
You can use your super to fund your retirement when you reach “preservation age”, which is from age 60. You can also use your super to begin a transition to retirement income stream (TRIS) while continuing to work.ii
Alternatively, if you continue working beyond preservation age, you can withdraw your super once you turn 65.
There are also some circumstances in which you can access your super early such as illness and financial hardship, however, eligibility requirements do apply.iii
5. Decide how to withdraw your funds
You may be able to withdraw your super in a lump sum, if your fund allows it. This could be the entire amount you have invested, or you could receive regular payments.
If you ask your fund for regular payments (paid at least once a year), it is known as an income stream and your super account transitions from the accumulation phase – where contributions are made – to a pension.
There are minimum withdrawals that you must make once you commence an income stream from super. For example, for those aged under age 65, a minimum annual withdrawal of 4 per cent of your super balance is required and this drawdown rate increases as you get older.iv
There is a lot to think about as you approach retirement, so if you’d like to discuss your retirement income options, please give us a call.
i ASFA Retirement Standard, December 2024 – The ASFA Retirement Standard – ASFA
ii Super withdrawal options | Australian Taxation Office
iii When you can access your super early | Australian Taxation Office
iv Payments from super, April 2025 – Payments from super | Australian Taxation Office
Financial missteps can mean missed opportunities
In a world of constant financial noise, from market updates and interest rate speculation to economic forecasts, it’s easy to feel overwhelmed and choose to do nothing.
But inaction can be costly when it comes to building long-term wealth. Whether it’s leaving money in cash, delaying investment decisions or ignoring the power of regular contributions, the financial consequences of sitting still can quietly erode your future goals.
Inflation is a wealth killer
One of the most overlooked risks of doing nothing is inflation. While your money might feel ‘safe’ sitting in a savings account or term deposit, its purchasing power is shrinking every year.
For example, if you’d tucked $10,000 under the mattress in 2014, ten years later in 2024 it was worth just $6926.70 in real terms, thanks to the average annual inflation rate of 2.7 per cent. That’s a 30.7 per cent loss in value without spending a cent.i
Even in low-inflation environments, the real return on cash is often negative once you factor in tax and inflation.
The ‘cost’ of cash
Holding too much cash for too long can be a drag on your portfolio’s performance. While cash plays an important role, it’s not designed for long-term growth.
Consider this:
- Over the past 30 years, Australian shares have returned an average of 9.3 per cent per year, while cash has returned 4.1 per cent annually.ii
- That difference compounds significantly over time. Based on those rates, $100,000 invested in shares could grow to approximately $1.4 million in 30 years, while the same amount in cash might only reach around $330,000.
By staying in cash, investors miss out on the growth potential of other asset classes.
The perils of ‘set and forget’
Many investors start out with good intentions. They set up a portfolio, make an initial contribution and then leave it untouched for years.
While long-term investing is a sound strategy, neglecting your portfolio entirely can lead to missed opportunities.
Here’s what you need to be aware of:
- Asset allocation changes – Market movements over time can affect your portfolio’s intended risk profile.
- Dividends – If dividends are paid out and not reinvested, you lose the benefit of the compounding effect.
- Changing goals – Your financial needs are likely to change as you age, but your portfolio won’t reflect that unless it’s reviewed.
Annual check-ups can help ensure your investments are still working for you.
Missed opportunities
Compound interest is one of the most powerful tools in wealth creation. But compounding works best if you’re consistently contributing and reinvesting.
Consider two hypothetical investors who both invest $10,000 earning an average 7 per cent per annum:
- Investor A contributes an extra $5,000 each year
- Investor B contributes nothing after the initial $10,000 investment
After 30 years (and not accounting for fees and other costs):
- Investor A may end up with more than $500,000
- Investor B may end up with around $76,000
The difference? Regular contributions and the magic of compounding.
You can do your own calculations with ASIC’s MoneySmart calculator.
From passive wealth to active growth
The cost of doing nothing can be even more pronounced for high-net-worth investors. With larger sums at play, the opportunity cost of holding excess cash or delaying strategic investment decisions can translate into millions of dollars in missed growth over time.
While capital preservation is important, so is capital productivity. Allocating funds across diversified asset classes can help balance risk while enhancing long-term returns.
Inaction, especially in times of market uncertainty, may feel prudent, but it often results in underutilised capital that fails to keep pace with inflation or evolving financial goals.
After all, your financial plan should evolve with you. A portfolio designed five years ago may no longer suit your goals, risk tolerance or tax situation. Life changes – marriage, children, career shifts, retirement planning – and your investments should reflect those changes.
The bottom line
Doing nothing might feel safe but it’s often the riskiest choice of all. Inflation erodes your savings; cash underperforms over time and missed opportunities can delay or derail your financial goals.
By taking small, consistent steps such as contributing regularly, reinvesting earnings and reviewing your plan regularly, you can build a strong foundation for long-term financial success.
We’re here to help you take control and make your money work harder for your future.
Living your best life in retirement
If you’re nearing retirement age, it’s likely you’re wondering if you will have enough saved to give up work and take it easy, particularly as cost-of-living increases hit some of the basic expenses such as energy, insurance, food and health costs.
Fortunately, someone has already worked out what you might need.
The Association of Superannuation Funds in Australia (ASFA) updates its Retirement Standard every year, which provides a breakdown of expenses for two types of lifestyles: modest and comfortable.i
Based on our average life expectancy – for women it is just over 85 years and men 81 – if you are about to retire at say age 67, you will have between 14 and 18 years in retirement, on average and depending on your gender.ii
ASFA finds that a couple needs $46,944 a year to live a modest lifestyle and $72,148 to live a comfortable lifestyle. That’s equal to $902 a week and $1387 respectively. The figure is of course lower for a single person – $32,666 for a modest lifestyle ($628 a week) or $51,278 ($986) for a comfortable lifestyle.iii
What does that add up to? ASFA estimates that, for a modest lifestyle, a single person or a couple would need savings of $100,000 at retirement age, while for a comfortable lifestyle, a single would need $595,000 and a couple would need at least $690,000.iv
A modest lifestyle means being able to afford everyday expenses such as basic health insurance, communication, clothing and household goods but not going overboard. The difference between a modest and a comfortable lifestyle can be significant. For example, there is no room in a modest budget to update a kitchen or a bathroom; similarly overseas holidays are not an option.
The rule of thumb for a comfortable retirement is an estimated 70 per cent of your current annual income.v (The reason you need less is that you no longer need to commute to work and you don’t need to buy work clothes.)
Building your nest egg
So how can you build up a sufficient nest egg to provide for a good life in retirement? There are three main sources: superannuation, pension and investments/savings. Superannuation has the key advantage that the money in your pension is tax free in retirement.
Your superannuation pension can be augmented with the government’s Aged Pension either from the moment you retire or later when your original nest egg diminishes.
Your income and assets will be taken into account if you apply for the Age Pension but even if you receive a pension from your super fund, you may still be eligible for a part Age Pension. You may also be eligible for rent assistance and a Health Care Card, which provides concessions on medicines.vi
Money keeps growing
It’s also important to remember that the amount you accumulate up to retirement will still be generating an income, whether its rentals from investment properties or merely the growth in the value of your share investments and the accumulation of money from any dividends paid.
You can also continue to add to your superannuation by, for instance, selling your family home and downsizing, as long as you have lived in the home for more than 10 years.
If you are single, $300,000 can go into your super when you downsize and $600,000 if you are a couple. This figure is independent of any other superannuation caps.vii
Planning for a good life in retirement often require just that – planning. If you would like to discuss how retirement will work for you, then give us a call.
i Retirement Standard – Association of Superannuation Funds of Australia
ii Life expectancy, 2020 – 2022 | Australian Bureau of Statistics (abs.gov.au)
iii https://www.superannuation.asn.au/media-release/retiree-budgets-continue-to-face-significant-cost-pressures
iv https://www.superannuation.asn.au/resources/retirement-standard/
v https://www.gesb.wa.gov.au/members/retirement/how-retirement-works/cost-of-living-in-retirement
vi Assets test for Age Pension – Age Pension – Services Australia
vii Downsizer super contributions | Australian Taxation Office (ato.gov.au)