Money. We need it, so we work for it. Mostly. When we can. We work hard, the majority of us for forty plus years, with a view to one day retiring and ‘living the good life’…or something like that.
For some of us, retirement is the promise of more. More time to ourselves to do more of the things we enjoy and spend with the people we love.
For others however, retirement is a looming concern they’d rather not confront head on. It beckons as a period of aging amid financial uncertainty…a place none of us want to end up after all that hard work.
With life expectancy at its highest recorded level (ABS) there are a lot of years to fill between retirement, generally at 65, and the 80.3 years an Aussie male can expect to see out, or 84.4 years for women.
So, how do you protect your income and make the most of your wealth to ensure you enjoy ‘more’ in your post-work years? Here are 8 tips to start you on the right path to a golden retirement…
- Anticipate a long life
With the averages suggesting you’ll have between 15 to 20 plus years to fill before you fall of the perch, it’s important to consider how you’ll fund two decades of living when you’re no longer drawing a weekly wage.
Consider how much you currently spend and ask yourself, could I live on my super balance or an aged pension?
Based on where you are at this stage of your life, will you have sufficient capital in your coffers to meet your retirement cashflow objectives, or do you need to do some more strategic planning and investing?
- Account for inflation
One of the common mistakes people make when undertaking cashflow projections in their financial planning for retirement, is to cost expenses based on today’s values.
At the current rate of inflation, the spending power of a fixed rate pension will be halved in just over twelve years. And how far will that standard managed super fund really stretch? This is where you need to be realistic with your number crunching.
- Stage a slower retirement
If you fear you’ll fall short financially as retirement approaches, perhaps you could consider a staged exit from the workforce, rather than leaping into a life of leisure that you might not be able to fund indefinitely.
Transitioning to part time employment could give you a little more breathing space and income to put to good future use.
- Seek (decent) advice
Understanding how today’s investment markets work is tough enough for experts, so why would you choose to wade through the slew of information (and misinformation) all on your own?
Having an objective and professional third party review your retirement plan with an unbiased eye and knowledge borne from years of experience could make all the difference when it comes to securing your future fund.
The only proviso? You must properly qualify any adviser you choose to listen to.
- Be mindful of the future you want
Not just for you, but for your family as well. Planning how you will use and protect your investment wealth with your loved ones can have multiple benefits, including a clear plan for divvying up assets when it’s time for them to be passed down to the next generation, and a sense of financial security for your children and grandchildren.
- Don’t waste your equity
Traditionally, many Australians have largely relied on the family home to sustain them in retirement. Specifically, they’ve attained to full ownership and therefore, a ready store of relatively secure equity.
Equity is indeed a valuable tool when creating wealth through real estate, if it’s utilised in a considered way.
But planning on drawing down equity in your own home on retirement is not a watertight financial strategy. For a start, most lenders will be reticent to lend funds against your house without proof of stable income.
If you’re clever though, you’ll have used your equity to create a lucrative, income producing residential property portfolio with which to fund your retirement.
- Don’t put off today…
Admittedly, sitting down to crunch the numbers around your retirement income can be a daunting prospect and as such, easy to delay. Procrastination in this instance though, will only equal lost opportunity.
The longer you take to get your financial ducks in a row, the less time you have to make any necessary changes to better your situation. Deal with it today and you won’t be left floundering without a plan tomorrow.
- Make a Will
This is another sooner rather than later thing everyone should consider. As much as we’d all like to consider ourselves immortal, the inevitable will happen to us all one day. Better to protect your family’s future than leave it in the hands of someone else, when you will have no say at all.
So there you have it…start today. Don’t delay. These 8 simple steps can lead you to a more secure financial future.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).