Planning for retirement can be difficult.
For example, when should you start saving, how much do you need, and who can help guide you, are all common questions we face as we move into middle age and our senior years.
Many financial commentators say you should start planning for retirement in earnest once your children leave secondary school and move into the workforce or tertiary studies, because it’s often around this time when parents enjoy a new-found wealth due to no more school fees.
This isn’t always the case though, and as we all know, there are many variables that may preclude this from occurring. The bottom line is we all need to start planning for our retirement sooner rather than later. After all, who knows how much the cost of living might be in the future, so organising a retirement plan ahead of time can significantly ease the pressure when the day finally comes.
When do I start saving?
Compulsory employer super contributions provide a good start for your superannuation from a working age. Currently, employers pay a minimum 9.5% of salary to your designated super fund.
Voluntary contributions can start at any age, and it shouldn’t come as any surprise that the earlier we start planning and contributing to our retirement, the better the eventual result will be. For example, starting early enables you to take greater advantage of capital growth in property assets and the benefit of compounding interest in superannuation.
Otherwise, if you only start planning for your retirement in your late 50s or early 60s, you will need to inject more capital to grow your investments to the level you’d like them to be.
How much do I need?
When people are planning for their retirement, they often ask financial planners ‘How much do I need?’, only to be told ‘How much do you want?’ A fair enough response, but not overly helpful.
If you’re finding it hard to get an answer for this question, there are plenty of freely available websites that can give you a good insight, such as the ASFA website.
How can I add extra?
- Make salary sacrifice contributions from your pre-tax salary.
- Be aware of the low-income super tax offset.
- Make extra contributions, i.e. from your post-tax salary, earnings from shares or self-managed super fund, property or windfall gains.
- Government co-contributions.
- Open a high interest savings account and allow your nest egg to grow for when you need it in retirement.
Where to get initial assistance or advice?
There are many websites that claim to provide you with sound advice about how to plan for your retirement, but are they independent and unbiased? Often it is difficult to tell, so when doing your initial research, be sure to go in with your eyes open.
One source that we can certainly vouch for is the ASIC Money Smart website, which has a great deal of information on superannuation and retirement, and is well worth a look if you are starting out or not sure what to do.
Remember, retirement needn’t be a subject just for those looking to retire in the near future. The earlier you start planning whilst still working, the better the results and the more relaxing your retirement will be.
An LLL Savings Account and/or LLL Self-Managed Super Fund Cash Account may also be of assistance; paying you a great rate of interest (with no bonus hurdles), internet access and funds always available when required.
Disclaimer: This advice is general in nature and does not take into account your personal situation, needs or objectives. Please consider the Disclosure Documents to decide if this product is right for you.