Retirement Planning

Consider these facts:

If you want to retire at age 55 on an income of $30,000pa (indexed) up to the age of 80, you will need approximately $500,000 to $550,000 saved.
If you want to retire at age 60 on an income of $30,000pa (indexed) up to age 80, you will need approximately $450,000 to $500,000 saved.
If you want to retire at age 65 on an income of $30,000pa (indexed) up to age 80, you will need approximately $350,000 to $400,000 saved.

As you can see, these are significant lump sums, which most Australians do not possess when they retire.

Retirement planning is about giving yourself choices, so that when you finally have all the time in the world to do whatever you want to, you can afford it.

Where once we could safely assume a government pension would be waiting for us at the end of our working life, the government is now strongly encouraging us to save for our own retirement by making superannuation compulsory.

Three of the major factors behind this push for self-funded retirement are: longer life expectancies, a declining birth rate and an ageing population.

If you are a 60 year old man today, you can generally expect to live until at least 80 years of age, and if you're a woman you may live until at least 84. (Source: Australian Life Tables, effective as at 1 January 2000).

A retired couple on a government pension, but not yet eligible for Aged Pension, receive a maximum of only $26,834* pa at the moment. It's not much, is it? It's certainly not enough to give you the lifestyle and financial peace of mind you deserve after working for many years.

It makes good sense to start planning for the lifestyle you want in retirement. Don't risk your longer term security by putting off making decisions about it. Think about what you want, then do something about it.

* As at 2005/2006 tax year.

What is Estate Planning?

Estate planning is the planning and documentation of the wishes of a person for the distribution, after his/her death, of all assets that the person owns.

What assets form the estate?

Basically, assets owned individually by the deceased form the estate. These can include:

Shares
Assets that are held as tenants in common
Cash investments
Any debts held by the individual

Assets that do not usually form part of the estate include:

Superannuation (if a beneficiary is noted)
Life insurance proceeds
Income streams that had a reversionary beneficiary noted

What is a will?

The will is the most important document in the estate planning process. The two main aspects that are covered in the will are:

Who will be in charge of your estate upon death; and
How are your assets to be distributed upon death.

Unfortunately, if you pass away before executing a will, your assets may not be distributed in accordance with your wishes.

What is an Executor?

If you have a will, an executor/executrix will be nominated within it. Amongst their many responsibilities, this person is responsible for the funeral arrangements, distribution of assets and any tax liabilities of the estate.

Being an executor is quite a responsible role, so care should be taken when deciding whom this person should be. The particular person needs to be trustworthy, competent and most importantly, prepared to take on the role.

What happens if I die without a will?

If you pass away without a will you are said to have died "intestate." In this situation, statutory provisions in each state and territory within Australia operate to determine who will inherit the assets.

In this situation, the next of kin, who is entitled to the largest share of the estate, applies for Letters of Administration. This means that the person is applying to be appointed by the Court as the person responsible for the administration of the estate.

The fundamental rule of intestacy is that the estate will pass to the next of kin of the deceased. Most states prefer spouses and children of the deceased, with no regard for the deceased's wishes.