Most baby boomers are well on their way, if not already well into, their golden years.
This is a generation that virtually patented the ideal of ‘greed is good’. But it hasn’t all been financial smooth sailing for every Aussie born between 1946 and 1964.
Baby boomers have, arguably more than most, lived through some of the most rapid and radical changes in human history. They’re the children of post war parents, who witnessed first hand an unprecedented industrial and technological revolution.
They were the first generation to start being made redundant by an increasingly mechanised workforce. And many boomers experienced one or more fiscal misfortunes during the ‘recession we had to have’ back in the early 1990s, or the more recent 2008 GFC.
With regard to the latter, a number of unfortunate baby boomers were stripped bare of super funds and life savings during their all-important prime investment years.
At a time when they were meant to be considering an exit strategy from the paid workforce, many remained tethered to an office job in order to rebuild completely shattered family nest eggs.
Some timely pearls of wisdom…
For those who still have the luxury of a little extra time up their sleeve before transitioning into a life of leisure, here’s some food for thought that can help to optimise your future financial planning as a later blooming boomer.
- Expect to live a long and healthy life
As modern science makes advances in treating and preventing disease, people in the western world are starting to live longer. Today’s average 65-year-old male can expect to live until the ripe old age of 87 years, while his female counterpart will almost reach 90.
Keep in mind that, with these being the averages, many can anticipate receiving a 100th birthday letter from the Queen.
This means, depending on how and when you choose to retire, you may conceivably need to fund another two to three decades of post-work life. How much investment income will be sufficient to sustain your ideal retirement lifestyle for twenty years or more?
- Account for inflation when crunching the numbers
Many people undertake financial modeling based on today’s figures, neglecting to consider the impact inflation will have on things like cost of living. Ideally, your investments need to be returning dividends well above the average rate of inflation, in order to ensure you’ll have enough in your future fund to pay more tomorrow for the life you plan today.
- Plan ahead for your retirement
Speaking of planning…will you one day wake up and decide it’s time to just dump work, or gradually ease yourself into a life of leisure?
These are important considerations. Whether you propose to phase your retirement and slowly reduce your hourly commitment to the boss or just get it done with one quick exit, essentially determines how pro-active you should be in your asset accumulation phase, and how large your fund must be to wind down from work.
- What lifestyle do you aspire to?
Start with the basics. How much does it already cost you just to live comfortably? Perhaps you like going out for dinner once or twice a week and taking an annual family holiday. Do you intend to continue these habits into retirement, when you no longer have that reliable working income?
And let’s not forget all that extra time you’ll have at hand to do the things you’ve only dreamt of being free to do.
Budget for the life you want in retirement and plan accordingly to get there.
- Know your rights
With various governments attempting to address the economic issues caused by our rapidly ageing population, legislation around retirement ages, superannuation access and things like forced redundancy are becoming somewhat blurred.
The bottom line? You cannot be forced out of a job just because you turn 65.
It’s critical that you seek independent counsel if you feel you’re being unfairly pressured into early retirement, from someone who can adequately guide you when it comes to your employer’s responsibilities and your rights.
- Seek advice
Don’t just sit on your employer established super fund as a reliable means to fund your ideal retirement lifestyle, because chances are it won’t be anywhere near enough.
Instead, ask for assistance in establishing a well rounded, high returning, low risk investment portfolio that reflects where you are right now and where you plan to be in the future.
- Use what you have at hand
One of the most powerful weapons baby boomers unknowingly have to wield when planning for their financial future is equity. This generation has lived through some of the most phenomenal residential housing value growth in our relatively short history as a settled nation.
As such, many are sitting on veritable goldmines in the form of the family home which was purchased thirty years ago, paid off ten years ago and has realised capital growth to the tune of 100 to 300 plus per cent, depending on location.
Just be aware that if you do intend to draw down on your equity, you need to do so in a way that will be low risk and not jeopardise your financial stability.
- Safeguard yourself
If the GFC taught us one very valuable lesson, it was to have protection…just in case. Any circumstance can eventuate to impact your financial stability – now and in the future – and generally it will be beyond your control.
Think natural disasters that can cause the value of an area to plummet or some global economic upheaval that sends ripple effects across the rest of the world, including here in Australia.
Not only do you need to safeguard your future fund with appropriate insurance coverage, and by ensuring you legally bequeath your fortune to its rightful heirs (your family) through a proper will.
It’s also essential to maintain a decent cashflow buffer – preferably in an offset account linked to any outstanding non-tax deductible debt – for those ‘just in case’ events you might encounter on your investment journey.
Remember, plan ahead and think strategically when it comes to how, when, where and what housing asset(s) you acquire as an addition to your investment portfolio.
Basing your ‘bricks and mortar’ moves around clearly formulated optimal outcomes, and from here, working backwards to give your actions as an investor purpose, will give you the edge when it comes to securing a financial future worth working towards.
If you would like further information on how to plan your ideal future fund with the best possible finance structuring, click here now to connect with the team at Trilogy Funding.