21 Jul Planning for retirement
No matter what age you are, when you’re working retirement seems a long way off. When you’re at high school, you’re not even thinking about retirement. You’re barely thinking about anything beyond the next weekend. When you get to university and you start working, you’re focused on saving money for a house and kids. It’s the same in your 30s and your 40s. It’s not until you get to your 50s that you begin to think about retirement as being very close. By the time you’re in your 50s though you have limited time left to save for your retirement and the less you have in your savings, the lower your quality of living will be when you do finally stop working. When people retire they want to do fun things such as travelling the world. They don’t want to be deprived of basic necessities such as electricity or fruit and vegetables. Unfortunately, without enough money in a retirement fund, that’s a very real possibility. So what are the steps that you can take to ensure that you have the kind of retirement that you want?
Buy a home
It doesn’t matter who you talk to or what article in the media that you read, everyone is saying the same thing. You need to buy a property or you will need to account for more money in retirement. You could decide to own an investment property rather than one you live in. If this is the case then you will have a steady stream of income while you retire and that will give you more flexibility. You do need to be aware though that as a landlord, you are going to have some expenses that other retirees won’t have such as home maintenance, so you’ll need to factor these into the rent that you charge. If you own a rental property and you find that you don’t want to be a landlord anymore then you can always move into the property yourself. Unless you already own a property, Melbourne and Sydney are not likely to be good choices for you, but when you retire it doesn’t really matter where you live because you’re not trying to find a job in a certain location, so you can feel free to move to another city or state.
Save money on top of super
Just because the compulsory super rate is 9.5%, and will increase to 12% in the 2024/25 financial year doesn’t mean that’s all you need to save for your retirement. You can certainly save over and above that. It’s up to you how much you save, and how you save it. You might choose to put it in shares, or you’d rather put it in a term deposit, or even a high interest earning account. Possibly you’d choose a mix of the three. If you did choose a mix then that would mean that you would minimise your risk and potentially increase your earning capability. The faster you build up your savings, the faster they will build in the future. That’s because of compound interest, which is where the amount keeps on building and building until you’re left with a large amount that you can gradually draw out each week.
If you’re unsure how much you’d need in retirement then a good place to start is by working out your living costs now and what expenses you won’t have in retirement. It’s worth allowing for inflation as well so there are no nasty surprises. Once you’ve worked that out you’ll be able to figure out how much you need and if you’re on track. If you’re not then you can start saving more or making cut backs to your retirement plans.