Retirement for Simon and Luba Bosch is when they stop paying private school fees for their children, aged 12 and 15. That's because they know they won't be able to afford to stop working until then.
"Our goal is to keep paying the Blue Mountains Grammar School fees until the children graduate from high school - that's our retirement," says Simon, an illustrator who has won multiple Walkley awards for his work.
The family has a home in the Blue Mountains, where prices are much lower than in Sydney, and a $160,000 mortgage.
"We often thought of renting in [inner-city] Leichhardt with full-time jobs. But there aren't the jobs," Simon says.
The trouble is, as work dries up, Simon, who is also a part-time teacher at a TAFE college, can't work at home and he runs up more than 1000 kilometres a week in driving.
"The travel is the trade-off for the cheap mortgage," he says.
Simon's earnings can fluctuate from more than $100,000 one year to just $30,000 the next.
Luba, meanwhile, has a part-time job with Blue Mountains Life magazine.
The couple has only $50,000 in super and the family credit card has about $8000 on it. "I just pay the minimum I can [off the credit card]," Simon says. "Occasionally, I can throw a couple of grand in.
"Retirement is only an option for people with regular jobs. I'm nearly 50 and never had a paid holiday or sick day."
PAUL MORAN
Paul Moran Financial Planning
Different people have different views of retirement - and how much it costs. It looks as if you will be able to really hit the mortgage once the school fees have finished, and this should be your priority.
The next step is to start to build your super. Given that it looks like a significant part of your retirement income may come from the pension (at age 67), super provides some advantages over other investment types.
It also provides a great way to manage your tax liability on a year-by-year basis. If you have a company structure, you should be able to claim a tax deduction for some contributions made to super. On high-income years you pay more in, on low-income years you pay less in.
But you can't claim if you are simply self-employed with an ABN, because no more than 10 per cent of your total income in the year can come from an employer such as TAFE.
TONY HARRIS
MakingCents
Living in the Blue Mountains is a false economy. The driving and wear and tear on the car would be costing $10,000 after tax.
And Simon can't illustrate while he's driving the car.
I think you need to bite the bullet. Rent out the Blue Mountains house and move into Sydney, where the jobs are. Forget TAFE - go to a private college and get some serious money.
It'd be better for you living in Sydney and renting. Choose somewhere near a suitable school.
I fear you have false expectations about your finances once the kids leave school. They'll be living at home for a while and will probably go to uni.
When you're earning a stable income, put more in super.
MIKE INGHAM
Obelisk Advisers
The good news is that you are well aware of and realistic about the challenge ahead to achieve a comfortable retirement.
At the moment, your financial priority is to keep paying the private school fees for your two children - not an easy task given your irregular incomes and the rampant private school fee inflation of recent years. Realistically, you may have to wait until your youngest child finishes school before attacking your retirement savings challenge in earnest.
However, you should take every opportunity to build up your superannuation savings. The gradual increase in your employers' compulsory super contributions from 9 per cent to 12 per cent from 2013-19 will certainly help your cause, but only where you are categorised as an "employee". This may not be the case for Simon's freelance work.
It is likely that you will fund your retirement through a combination of the age pension (available at age 67 from July 1, 2023), your superannuation savings and possibly by releasing equity from the sale and downsizing of your home when you retire.
Currently, home-owner couples are eligible for the age pension if they have assets of up to about $1 million and receive an annual income of less than $66,000.
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Frequently Asked Questions about this Article…
How should I prioritise paying private school fees versus saving for retirement?
If private school fees are a short-term obligation (for example, until your children finish high school), the article suggests prioritising keeping those fees paid first. Once school fees finish you can redirect more cash to attacking your mortgage and then build superannuation when your income stabilises.
What effect does irregular freelance income have on retirement planning?
Irregular income can make steady retirement contributions difficult — the article uses the example of earnings swinging from about $100,000 to $30,000 in different years. With variable pay, focus first on essential obligations (school fees, mortgage minimums), use higher-income years to contribute more to super, and consider managing tax and contributions strategically in good years.
Should I pay down my mortgage or put extra money into superannuation?
The article recommends tackling the mortgage once high-cost obligations (like private school fees) are finished — paying down the mortgage can free cash flow. Building super is also important, but if your immediate priority is high recurring costs, reducing debt first may be more practical before increasing retirement savings.
Can self-employed people claim tax deductions for super contributions?
According to the article, if you operate through a company structure you may be able to claim a tax deduction for some super contributions. However, if you are simply self-employed with an ABN you may not be able to claim in the same way — the article notes a rule about employer-sourced income (no more than 10% of total income can come from an employer such as a TAFE) that affects eligibility.
Will compulsory employer super increases help me if I do freelance work?
Only where you are classified as an employee will the gradual increase in compulsory employer contributions (mentioned in the article as moving from 9% to 12% over a past period) help. If much of your income is freelance or from self-employment, you may not receive those employer contributions, so you should look for other ways to build super.
Is it better to move closer to work (eg. Sydney) rather than living in a cheaper area and commuting?
The article presents differing advice: living out in the Blue Mountains can save on mortgage costs but creates heavy commuting costs and wear (estimated around $10,000 after tax) and limits work options. Moving and renting closer to jobs in Sydney can reduce travel time and potentially increase stable earning opportunities, which may help long-term retirement savings.
How can the age pension, superannuation and downsizing work together to fund retirement?
The article suggests many households will fund retirement with a mix of the age pension (noting eligibility from age 67 as of July 1, 2023), their super balances, and possibly releasing equity by selling or downsizing their home. Current asset and income tests (cited examples include home-owner couples with assets up to about $1 million and incomes under roughly $66,000) affect age pension eligibility.
What practical steps can I take now if I have limited super and some consumer debt?
Based on the article's case, practical steps include prioritising essential payments (school fees), making at least minimum payments on credit cards while trying to reduce that balance when possible, putting extra cash towards the mortgage once high-cost obligations end, and taking every opportunity to add to super — especially in years you earn a more stable or higher income.
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