Want to Live the High Life in Your Old Age? Not if you Ignore Retirement Planning!

By Kristie Kwok on 7 Jan 2014
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Want to Live the High Life in Your Old Age

Retirees are urging young people to start saving now

It seems the good life in retirement that many dream about is becoming further out of reach.

Suncorp’s superannuation report, Rise of the Grudge Workforce, shows that only one in five baby boomers have saved enough for retirement.  Alarmingly, it predicts that almost half will not be able to afford to give up work until they are well into their seventies.

The Problem is That People Start Saving Money For Retirement Too Late

Younger workers are generally less engaged when it comes to superannuation and when to start saving for retirement.  Recent research by REST Industry Super found that almost half of Australians aged between 18 and30 admit they don’t have a good understanding about their retirement savings.

“It’s not one of the key things that comes up in conversation because it’s something they don’t necessarily recognise, super is just on their pay slip and you never see it,” said Damian Hill from REST.

The problem however, is that if you don’t start long term saving early and adopt appropriate retirement saving strategies, you risk having to work out of financial necessity when you are old and frail.

Advice From Retirees: Start Saving for Retirement Early, Pay Down Debt and Use Professional Guidance

This advice comes from retirees through the BlackRock Global Investor Pulse Survey.

Interestingly, 15 per cent of Australian respondents owned investment property.  The rate of ownership increased to 35 per cent if you narrow the results to include only those who are more affluent.

Retirement Saving Strategies Can Involve Superannuation, Investments or a Mix of The Two

Compulsory superannuation contributions are made by employers on behalf of their employees into appropriate super funds.  Workers can also make voluntary contributions.

Advantages of using super as a retirement saving strategy includes tax concessions and government co-contributions for those eligible.

Its main drawback is that you can only access your money at retirement age.

However, you can also accumulate retirement savings through Investments outside super.  

Defensive investments such as term deposits and bonds typically have lower risk but offer lower returns.

Growth investments such as shares and property on the other hand, are more volatile but generally increase in value over time, so they are suitable if your investment horizon is for the long term.

Investment Properties a Popular Addition to Retirement Portfolio

Although there are higher transaction costs involved, investment properties are common as part of an overall retirement saving strategy because of attractive rental yields and the opportunities for capital growth.  There are also tax benefits from negative gearing and depreciation allowances.

However, investors risk a lack of portfolio diversification if property is used as the main investment to fund retirement. 

A well-diversified portfolio with different asset types can better withstand market fluctuations and significant financial events.

The advice provided on this website is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should seek your own independent advice, having regard to the appropriateness, your objectives, financial situation and needs.

About the Author

Kristie Kwok is a Street News writer and a fully qualified chartered accountant with a Bachelor of Accounting and Finance degree. Kristie has a passion for all aspects related to property. She also has a strong interest in the economy and financial markets. Kristie has worked for reputable corporates such as KPMG UK, UBS, Lloyds Banking Group and the Royal Bank of Scotland.

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