Now is the time to start planning for your future

Now is the time to start planning for your future

There’s no avoiding the fact that the vast majority of decent, hard-working Australians are grossly under-prepared financially for a stress-free retirement.

The numbers are staggering!

Official government statistics confirm that, as at June 2016, only 18 per cent of the 3.6 million Australians aged 65 or more were financially independent.

That means almost three million Aussies who should be enjoying their golden post-work years are extremely limited by what they can do because they are reliant on fiscal support to maintain their lifestyle.

In some respects, it’s not surprising. Our ambitions have been modest. The approach to planning for retirement within our grandparents’ era usually meant hanging up the work boots at 55 to 60-years-old and drawing a pension to see out the years.

Well, that particular income source today looks very dire if you’re hoping to live beyond the basics. The pension amounts to $30,000 per annum per couple and the eligibility age continues to be a moving target.

Try this for an exercise: Spend 10 minutes adding up what your preferred lifestyle will cost each year (in today’s dollars). Then divide your anticipated superannuation balance by this annual figure. Thin, isn’t it?

Superannuation laws keep changing, too. In addition to politicians continually clawing back tax benefits, the age for accessing superannuation is on trajectory to reach 70. What will you do if you want to put the cue in the rack before then?

Those who believe the family home will provide a nice little nest- egg of tax-free savings need to think a bit more. It’s near impossible to comfortably retrieve equity from a property you reside in once you’ve scaled back your earning capacity to service a debt.

Holding onto your home is also costly – even if you’re mortgage free, it still sucks up $10,000 or more per year for council rates, insurance, and basic maintenance. Where will that money come from if you’re no longer working?

One part of the problem is our futures are in the hands of politicians. All sides of politics appear totally ill-equipped to manage the Nation’s finances and therefore choose to tinker with the public’s purse to help balance their own books.

Changing pension ages, increasing taxes and removing incentives are all part of modern-day political wrangling in a world where the human race is growing in size and modern science enables us to live much longer. Add to this, the rising cost of living, an insatiable human appetite for creature comforts like travel, dining out, and nice things.

The biggest problem of all, sadly, is that society doesn’t teach financially literacy. We’ve failed to develop a culture wherein each household is being proactive during those 45-years spent in the workforce so that the majority of us are financially independent by the time we choose to exit the workforce.

THE SOLUTION
Rely on taxpayer-funded aged pensions and employer-funded superannuation at your own peril! The only way for you to ensure that you can enjoy the life you aspire to have in retirement is to take charge and make your own plans.

Most self-funded retirees with comfortable and secure lives earned similar incomes to the rest of us. It’s just that they had different priorities and made better decisions with what they did with some of that money. They planted the seeds of their portfolio years in advance, so the trees had sufficient time to grow and later bare fruit!

Here are some basic tips on what you can do now that your future self will thank you for.

Visualise
Think about the type of retirement you desire. Consider how far off it is and what your long-term goals are. Visualise where and what you might like to live in, the daily activities you see yourself enjoying, travel, etc.

Do you have special projects that will light your heart with fire and fill your free time? Take a moment to jot these thoughts down then estimate how much income you’ll need to fund that.

Catch the small, sweet property fish 

Take a moment to get your head straight about investing. You don’t need a high-paying job to become the proprietor of an excellent property portfolio. There’s a much smarter way than locking up so much capital in one expensive piece of real estate which then sucks your cash flow dry.

In the right location, you can achieve a cash flow positive outcome with your investment property if you have the ready dollars or the ability to raise few $$ from an existing property. Northpoint Mortgage specialises in Equity Released Loan, ask us how! Do you know you can also purchase a property through a Self-Managed Super Fund? Find what you need to know here.

Buy like an investor
Acquiring real estate as a means of funding future retirement is all about understanding property economics, identifying future growth drivers, detailed analysis, and lots of statistics. A real-estate friend of mine says that it has little to do with train stations, schools and shopping centres. And, you most certainly should not be selecting a property based on whether it appeals to you as a homeowner today or in years to come. Northpoint Mortgage will be happy to introduce you to some reliable and experienced business partners to help you think as an investor.

 

Photo by Simon Migaj on Unsplash