In a recent survey 48% of our respondents told us they have an investment property! That’s music to a finance specialist’s ears – it’s satisfying to hear those people have a financial strategy that could lead to a more comfortable retirement.
However, 66% of respondents also said they are worried about not having enough money in retirement. This is a concern for many of us as almost 80% of Australians over 65 receive the aged pension. For 66% of those retirees the pension is their main source of income. Coincidence?
So have YOU started thinking about retirement? It is NEVER too early to start planning for retirement – but it can certainly be too late.
Where do you start?
And when should you start? Firstly, you need to focus on the lifestyle you want in retirement and then how you plan on getting there financially.
What if your plan changes?
That’s fine. You can make goal adjustments along the way. In fact, a retirement plan shouldn’t be a ‘set and forget’ strategy. Chances are your imagined needs in your 20’s may look quite different by the time you reach your 50’s.
How much do you need?
A good starting point is to calculate how much you need to provide for comfortable retirement years.
For most of us this means being able to pay bills without financial stress, the odd holiday, maintain a house and car and an occasional indulgence. You will generally require 60-80% of your pre-retirement income to lead the type
of active lifestyle you probably desire IF you have paid off your mortgage. It was previously assumed the first ten years of retirement would be our most active and costly. With longer life spans and a possible increase in health or mobility issues as we age our later years could end up costing more.
What should a plan include?
There is no ‘one size fits all’ plan for future financial stability. If you are in your 20’s and plan to retire at 65 your options may be more diverse than if you’re approaching 50.
Many Baby Boomers will outlive their superannuation savings. While younger generations will have more time to maximise super balances at retirement they may also have significant HECS debts. This was generally not an issue for previous generations.
As you approach your retirement years, salary sacrifice,
a transition to retirement strategy or property investment through a self managed super fund (SMSF) could help build your superannuation balance. But do not make these decisions without talking to your financial planner.
Property has long been considered a proven road to personal wealth, yet only around 20% of Australians successfully invest in property outside the family home. There may be more than one way to get your foot on the property ladder:
Save a deposit – Budget and stick to a savings plan. Gen Y’s living at home should maximise the opportunity to save and invest. Increase your savings each time you receive a pay rise.
Ask your parents to help – There are several ways parents might help their children into their first property including a cash gift/loan or acting as guarantor. There are also new mortgage products such as a family pledge or family guarantee. If you have elderly parents perhaps they can contribute some of your inheritance now to help you get ahead?
Use rent as a savings plan – A continuous rental history of 12 months may be taken into account when assessing your ability to service a loan so keep those receipts.
Co-ownership – Perhaps explore investing with family or friends? But be warned – do it properly and get a loan agreement in place first.
Already a home owner? Access the deposit for your NEXT property by using the equity in your current home or property.
See – there ARE options!
The earlier you start planning for retirement the greater your chance of living the comfortable future lifestyle most of us desire.