Most of us imagine our retirement as a time to enjoy new hobbies, travel the world, and spend time with our grandchildren.
The bleak reality for many though is that there simply won’t be enough money in the bank to make this dream come true, and with the retirement age in Australia increasing, Aussies are no longer able to rely on the aged pension as their sole income.
However, with the right strategy and planning in place, you will be able to build the best retirement plan for you and have solid steps in place for a comfortable retirement.
Do you have enough money in your Superannuation for a wealthy retirement?
According to a recent REST Super survey, 66 per cent of Australians are worried they don’t have enough money to retire comfortably. This figure might seem daunting, but by making smart investments today, you could set yourself up for an early retirement, reduce your debts, and build a comfortable retirement to enjoy in the future.
When we talk about supersizing your superannuation, for a ‘comfortable’ retirement, single people are advised to save $545,000 or $640,000 per couple according to the Association of Superannuation Funds of Australia’s Retirement Standard. It’s estimated that to live without stress within each pension payment, singles will need close to an average of $43,000 in savings for each year of their retirement.
In a recent blog, we stressed that superannuation should not be a set-and-forget activity, particularly when you’re over 50, even though many of us tend not to think about our super until we need really it.
Many people choose to invest in shares or superannuation to achieve growth in their retirement fund. The challenge with this approach is that you can’t control fluctuations in the market – your role is often passive.
Investing in property is different
There are certain things to consider if you plan to live off funds from investment properties when you retire. For example, if you are planning to live off rental income or heavily rely on it, you will need to ensure the return of the property per year covers your cost of living.
On the other hand, if you are selling your investment properties to live off the total sale funds, you need to ensure you have a plan of how to make the money last throughout your retirement.
It is also likely, depending on how recently you bought your property, that the value will have changed, so be sure to get a property valuation to determine how much equity you have in your home.
Do you want to work part-time?
Perhaps you’re still early in your career, and already feeling a little drained by full-time employment.
How would you like to be working part-time in your forties? It’s not as unbelievable as you may think.
You can use multiple investment properties to generate capital growth over time, and then leverage the equity to pay off your debts and create wealth for your future. Sounds nice, doesn’t it? The key to this though is all about timing and getting in the game as soon as you can afford to.
A common mistake is selling property too early or getting frustrated at the return. So many of us lack patience and are chase money for the now, which means we often lose sight of the fact that investing is ultimately a long game that you need to play to generate the highest amount of profit for your future.
If you are in a position to purchase an investment property, it’s never too early to start. Just think, the longer you own a property the better chance you have for capital growth.
Dumping debt before retirement
Unfortunately, just because you’ve retired it doesn’t mean all of your debts magically disappear (we wish!) Before you start seriously considering retirement, you need to weigh up what debts you have currently, how much you still owe on each of those debts and how long you have left on them. Here is a handy checklist to review before you take the leap.
- Work out your debts and what they total
- Do a comparison of what you earn, owe and spend
- Look into whether you might benefit from rolling your debts into one
- Pay your debts on time to avoid additional charges
- Try to pay the full amount rather than the minimum owing
- Look at whether you can afford to make extra repayments
- Shop around for providers with lower interest rates and no annual fee.
Extra super contributions
While some people leave super contributions solely up to their employer, Money Smart talks about how you can continue to grow your super for a wealthy retirement through voluntary contributions (or non-concessional contributions). No matter how small the payments are, they all add up over time and can reduce the amount of tax that you pay.
You should regularly check that your employer is paying the correct percentage of your wage into your super account – despite whether you are casual, part time or full time. You can check your employer’s contribution via your payslip, myGov account or super account.
There are other ways to grow your super, including salary sacrificing, low income super tax offset, government co-contributions, or even by downsizing your home and putting up to $300,000 from the sale into your super (depending on these factors).
Ready to get started?
Now is the time to start. No matter how far into the future you plan to retire, it definitely isn’t something that should be left to the last minute. Growing your super fund for a wealthy retirement is a long-term process, but one you will be thankful for when you do reach retirement and want to live comfortably.
The team at Inovayt has a wealth of knowledge to help you plan for your retirement. Get in touch today and book a no-obligation appointment.