When you’re living life and having fun sometimes, it’s easy to forget about retirement. Imagining and planning out the future is very difficult when it’s years away. But, many Australians are now retiring broke and struggling to make ends meet. Let’s change that.
There are a few mistakes people make that can impact the comfortability of their retirement. These are easily avoidable and with a few simple steps, you can relax knowing that your super will be able to carry you through your golden years.
Retiring too early
The average Australian can expect to live until their mid-late 80s. So, if you’re choosing to retire in your 50s you have to be prepared to pay for at least the next 30 years of your life.
Many people will say just working longer is an option, but if you retire at 60 you only have to have 20 years of spending saved. It is not always the best solution for the average person.
So what other option do you have? Invest. Use some simple and easy ways to find financial wealth throughout your working years. Whether you start at 20 or 40, investing money is like leaving a warm hug for your future self.
Carrying debt into retirement
Even when you’re working it can be hard to keep up with mortgages, car payments, or credit cards. So imagine trying to make these payments when living off your super.
While earning, make an effort to cut down on debt. Look at what loans hold the highest interest rates and consider paying those off first. You may even have to consider downsizing your home to save money on your mortgage.
Not realising how much money you need to retire.
Humans cost a lot to just survive. The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard calculates that a “comfortable” retirement for a couple costs $61,909 per year. For singles, the figure is $43,687 per year.
If a couple or single does not have enough money prepared for retirement it leaves them heavily reliant on the age pension. Which is a small payment from the government to support elderly Australians, it is not a livable wage.
Not topping up your super
Throughout the year you can make separate contributions to your super. This can be done through ‘salary sacrifice’ which is before-tax contributions from your employer as well as the necessary employment payment. You can also pay independently with your after-tax income.
Making extra contributions is a great way to boost your retirement savings. And it can reduce your tax. If you’re on a low income, you may be eligible for extra contributions from the government.
Anticipating large pension payments
Your pension payments rely heavily on your current life situation. If you have large savings, your partner still works, you are employed, having too many assets. The government does an assessment that calculates how much pension you are entitled to. Your pension is calculated based on the combined assets and earnings of a partnership. If these are highly valued you will begin to see your pension fall eventually to nothing.
You’ve decided to retire at 55, you don’t want to work anymore and you’re waiting for your government pension. Unfortunately, many people forget you cannot earn an aged pension before the age of 65. If you retire before then you have to fund your own life.
The best way to prepare for retirement is to think ahead. It will be worth it in the end. At National Wealth Advisory, we can connect you with financial experts who will be able to help you grow your wealth for retirement. Contact us today