Retirement, it always looks so far away and then one day, it is there. Most Australians want to spend their retirements doing the things they never had a chance to do when they were busy working but many Australians find that is not what happens. You see, unless you invest in your retirement fund – you may end your working life with barely enough to live on and even struggle just to maintain your current way of life.
There is never a bad time to start saving for your retirement fund and here are a few ideas that might help you get started:
Personal Contributions To Your Superannuation Fund
We all have a superannuation fund in Australia and as long as you are working then both you and your employer are contributing something to your retirement savings. It will not be enough to live the high life on but it should be enough to cover the basics of retirement.
You can get a bit more out of your superannuation fund by making additional voluntary contributions to that fund and there are some mild tax breaks for doing so. Superannuation fund investments, however, are required to be very safe and that means the return on investment for this kind of saving is low.
Put Money In The Bank
Saving money in the bank is the “old school” approach to retirement and having some savings, which you can quickly access and spend in an emergency, is a good idea. However, interest rates are at a historic low and that means saving large sums of money in the bank is not a good idea.
When interest rates are low, the value of your money barely keeps pace with inflation and it certainly does not increase in value. Have you noticed how $10 does not go as far today as it did 20 years ago? That is what happens when inflation outpaces the value of something. Saving money in the bank now is going to make it hard to make ends meet in retirement.
Invest In Real Estate
You knew I was going to say this, right. After all that’s what I advise people to do every day. However, here is why I do that and why it makes sense for your retirement plans.
When you take a mortgage to pay for a property, you are essentially leveraging your own money into a larger sum. If you have $100,000 in cash and take a $300,000 mortgage. You are investing $400,000 in a property and not $100,000. Therefore, any gains you make on the property are greater than the gains you would make – even if you could find a bank account paying as much in interest as the property market.
In essence, that is free money and over the course of a lifetime, it is a lot of free money.
However, debt is bad, right? No, debt you have to pay is bad. However, a mortgage on an investment property is debt someone else will be paying off for you and over time rent, payments will rise to be worth much more than mortgage payments. Therefore, in a few years’ time, you get more money in rent than you pay in mortgage fees. More free money.
Finally, if you pick the right Australian market (and that is where I come in), you can make much higher returns on property than in superannuation or a bank account. That is even more free money.
People who invest in property can look forward to retiring in style. Want to know more? Then come and talk to me about getting your money to work harder for you, so that you can retire in the way you want to.
