Wednesday, 24th May 2017
Hands up those who've calculated how much you'll need in retirement? And how did you calculate those figures? With a professional, or as a rough calculation on the back of an envelope? Because if you don't get this figure right, you could be living on just over $10,000 a year in retirement… and no, that's not a misprint!
According to the Association of Superannuation Funds of Australia Limited (ASFA), the average superannuation balance for men aged 65 to 69 was $194,633 for the 2013-14 financial year. The scorecard was even worse for women, whose average $117,144 was nearly $80,000 lower than that of their male counterparts.
If we break that down over a 20 year period - the average Australian life expectancy - you're looking at that $10,000 a year to live on in retirement - and that's probably just enough to put food on your table and nothing else. You won't be heating your home and putting fuel in your car, there won't be any money available to pay your rates or any unexpected medical expenses. Life will be pretty grim and there's not much else that can be said for it.
Compulsory superannuation can play tricks on your mind, because it can fool you into thinking you've got your bases covered when it comes to your retirement fund. Surely the government has calculated 9% of your wage as being enough for your twilight years? And if not, what else are we meant to do?
The simple fact is, you will always need more than you think in retirement… and compulsory superannuation will never be enough.
Even if compulsory contributions rise to 12%, that's not going to fix our nation's retirement balances. The only solution is to either start socking away extra superannuation savings or investing independently from Day 1 of your working life. When you think about it, this is where you can make the biggest difference to your wealth, especially during the first 10 years of your career when your external commitments are relatively low. You generally won't have any dependents on the scene and you're usually quite flexible about where you live and the type of dwelling you inhabit.
It's the perfect time to become a 'rentvestor' whereby you live where you enjoy, then invest using a buy-and-hold strategy in another area that's going to give you upfront cashflow and long-term capital growth. If you do start earlier like this, you won't need as much money later in life because it will have been growing there in the background for you.
You must have savings and you must have investments - end of story
While this wealth building strategy of combining your compulsory superannuation contributions with independent investments when you're young is the perfect strategy, many Australians blow a fair bit of their savings at that stage of life on the latest technology, travel and lifestyle. They swing the balance too much towards the 'having a blast, wish you were here' side of the scale, when it needs to be a bit closer to 'enjoying myself but planning for the future'.
Now if your early working years are far behind you, there's still time to make a difference to your retirement savings. The balance of your compulsory superannuation fund may not be anywhere near enough, but it's possible to grow your wealth through property investment in a relatively short period of time. I've discussed before on my blog how to build $1million in net worth with a 10 year, 5 property portfolio plan, and this is still more than possible with a mix of dwellings purchased in strategic locations throughout Australia.
This is the perfect strategy for anyone with retirement ticking ever closer and by working with a property portfolio specialist such as myself, you'll be able to plan for a comfortable retirement no matter what your stage of life. Yes, what you may consider 'comfortable' may not be enough for someone else (and vice versa), we'll still be able to work out a plan to suit your needs whatever they may be. I, for one, would never like to give up my overseas travel, the big family Christmas (where I get to spoil my beloved grandchildren like they wouldn't believe!) and I'd hate to say goodbye to my frequent purchases of heels!!!
Please contact me for your personalised residential investment plan today on 1300 736 754 or email firstname.lastname@example.org to set up an appointment.
Until next time,