Book Review > Funding Your Retirement

Max Newnham has worked as a chartered accountant since 1974, specialising in tax, small business and superannuation. He writes a regular column for the Melbourne Age and has also written books on Tax, GST, superannuation, business success, and self managed super funds. He is a partner at TaxBiz Australia.

“Funding Your Retirement" is a practical guide to anyone thinking about having enough money to fund their retirement and is firmly grounded in the here and now with information relevant to Australians in 2011. The book covers retirement rules such as when you can access your super and income tax implications for your investments in some detail including reference tables as an appendix.

The book is easy to read with various anecdotes scattered through to illustrate particular circumstances. He gives some history of the way pensions have evolved and why it is now essential to plan for your own self funding. Max encourages all of us to address important questions including:

• What are your financial, lifestyle and retirement goals;
• How much money will you need in retirement;
• What do you own and owe now;
• How much do you earn after tax;
• How much money do you need to fund your lifestyle.

He discusses some strategies for investing at different stages in your life covering topics such as salary sacrificing, salary packaging, consolidating debt and investing in shares or property. He goes on to discuss various risks with issues such as inflation or interest rate changes and the implications of possible health or disability risks.

He discusses possible investments including asset classes such as shares, fixed interest and property and suggests various model asset allocations that might be suitable at different stages in life. He spends a chapter on direct property investment as this is very popular with Australians. He warns about sales of products being dressed up as financial advice where the benefit is more to the salesperson than to you.

Finally there is a selection of readers questions sent in to Max from his newspaper columns.

I enjoyed the book but I would have liked to see a section at the very beginning to really drive home the need to do something over and above the 9% compulsory super contribution and the effect of compound interest on early contributions. He gives examples in chapter 6 of the effect on your final superannuation balance of salary sacrificing $20, $50 or $100 a week but it is very hard to think what an extra $156 a week might mean to your lifestyle in 40 years time taking inflation into account. One table shows that inflation in consumer prices over the whole of the twentieth century meant a 50 times increase in the cost of food but a 190 times increase in average weekly earnings. If that repeated, and there is a period of high inflation over the next 40 years, $150 might be the price of a cup of coffee and a burger!

One further aspect of the book worth noting is the detail about current tax levels and rules. This is both strength and a weakness. If you are planning and then implementing that plan you need this sort of information but tax rules change frequently and can easily be out of date. For example, he spends five pages on tax deductions for cars but this is no longer strictly relevant as it has been completely changed by the recent budget.

Overall, this is probably not the book you would give a twenty something just starting work to persuade them to think about their super. But it is the book for you if you are a bit closer to retirement, seriously thinking about it and contemplating using a financial adviser for the first time or perhaps if you are unhappy with current advice. These are probably the people that Max and his colleagues see at Taxbiz all the time and this is likely to be exactly the target audience he had in mind.