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Income Streams

Funding retirement with a growing income stream

Chris Morcom
Partner/Private Client Adviser
22 Aug 2011

Recently ASFA released their updated Retirement Standard, which benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in their post-work years.  The standard has been revamped to reflect changes in living standards, new expectations of retirees, and their evolving spending patterns. 

The benchmarks are updated each quarter to reflect the impact of inflation,  and the most recent national figures (for the March quarter 2011) show a couple desiring a comfortable retirement would need to spend $54,562 a year while those seeking a modest retirement lifestyle need to spend $31,623 a year.  Details on the difference between the lifestyles and further information on the expenditure items in the benchmarks can be found on the ASFA website:  http://www.superannuation.asn.au/RS/default.aspx

The updated benchmarks show an increase of 1.3% from the December quarter – annualised this is an increase in the cost of living for retirees of some 5.2% per annum.  Retirees looking to fund their income needs personally should consider the rising cost of living when constructing their investment portfolios.  Placing your money in bank term deposits may seem safe, but the income generating capacity of your money does not rise.  This can result in a loss of purchasing power over time, and the need to draw on capital to fund your needs.

An alternative is to invest some of your retirement nest egg in assets that grow their income over time.  Consider the table below – it shows four quality Australian companies and the growth in their dividends over the past 10 years.  

Evidently, while share prices can move about in the shorter term, if money is invested in quality companies that are well run and have a track record of paying growing dividends, then retirees can to some extent protect themselves from the long term rising cost of living.

For advice on “inflation-proofing” your investment portfolio, speak to your Hewison Private Wealth adviser today.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.