When it comes to retirement planning, there are four types of people. Use this guide to improve your life in retirement.
Type 1 – No savings and no super

The largest group are people that live week to week and give very little thought to the future. This group of people will not only rely solely on the aged pension, they will also have to wait until they are around 67 until they can ‘retire’. Sometimes people find themselves in this position because of circumstances outside their control. However, often these people just haven’t taken the time to sit down and get their finances in order. Many of these people are small business owners or contractors that do not have the benefit of their employer paying into their super fund. A great first step for these people is to do a household budget. If they can reduce their spending, start putting a bit away for the future.

Type 2 – Rely on standard super contributions

The second group are those that don’t have a plan, but are fortunate enough that their employer makes super contributions. Depending on how much they have in super, they may also be required to work until their mid-sixties. These people should make sure they look at which super fund and investment option they are in. Most funds automatically put you into their default investment option. For some funds their default investment option is higher risk and for others it is more balanced. Whether these investment options are right for you depends on your age and how much you have in super. Generally, you should be looking to take more risks when you are younger. Not doing this will have a big impact on your retirement savings.

Type 3 – Self planners

The third group have average or above average incomes, but they have a plan including a range of investments matched with their goals. Their plan could be as simple as pay off the mortgage as soon as possible and maximise the use of super. These people may have the ability to retire when they are 60 and are able to access their super. Even though they may be able to access the aged pension at some point in the future, they are still likely to have above average incomes in retirement.

Type 4 – Active plan for retirement

The final group includes those who have a comprehensive plan for their retirement. They more than likely have clear goals and investments to match these goals. Not only do they invest, but they have more than likely maximised their chances of success by minimising the fees they pay and having a diversified investment portfolio. This group have given themselves the best chance of retiring when they want and having the retirement they want. Most in this group are able to retire by 55 or sooner.

With a bit of work, most people with average household incomes can get themselves into the third or fourth group. The main thing is to plan early. The mistake I see most people make is they leave it until they are two or three years from retirement. By planning early, you will give yourself the best chance of success.

If you are in group two or three, book a chat via the button below to discuss how you can improve your retirement planning,

About the Author
Phil Harvey is an independent financial adviser. In 2017 Phil set up his company Construct Wealth to help clients best manage their finances so they focus on what is important to them. He is a founding member of the Profession of Independent Financial Advisers and a tax financial adviser, registered with the Tax Practitioners Board.

General Advice Warning
This advice contains general information. It may not be suitable to you because it does not consider your personal circumstances. Phil Harvey and Construct Wealth are authorised representatives of Independent Financial Advisers Australia (AFSL 464629)