Retirement: Add Funding It To Your Bucket List
Nobody likes to think too much about the “R” word. It is one of the biggest changes in our lives, yet many of us are simply unprepared for it. While we dream of escaping the daily grind, no longer working and having increased leisure time at our fingertips – most of us have no idea how we will fund our lifestyles.
I am talking about retirement. Put simply – it is the one time in our lives where we have a sum of money and no idea how long we need it to last us. It’s bad news for your bucket list and even worse news for your bank balance.
If you think it is tough living paycheck to paycheck try getting a sum of money and making it last for possibly 20 to 30 years or more. The thing that makes it hard is, macabre as it sounds – we do not even know how long we will live for and even what circumstances we may need as we age.
Many people no longer qualify for the old age pension and even if you do, at around $1,245 per couple a fortnight it is not a princely sum that will go too far – so reliance on it is no longer an option.
Superannuation is largely inadequate and for most people will also not deliver enough funds for a comfortable retirement. And our life expectancy is getting longer with an average lifespan of 82.45 years. For the first time in our lifetimes, for some people the retirement phase of their life can almost be as long as the years they have worked!
While performance can vary from fund to fund with some stronger than others and some offering a more diverse range of asset classes, the fact remains that returns are limited and can also be adversely affected by volatile share market twists and turns. In 2011-2012 funds returned just 0.4% - dramatically below the average return of around 7%.
Many are surprised to look at their statements and see the various fees that are frequently deducted from their superannuation including administration fees, advisory fees and switching fees. Watch out or you may just be charged for being alive!
This means that in order to retire with a level of financial comfort, in addition to your superannuation policy you need to build a portfolio of income-producing assets that can work for you.
Property remains the favourite choice for most Australians as a long-term investment due to the potential for strong capital gains. It also delivers flexibility and retirees can opt to hold onto property assets for an income stream from the rental return – or sell and cash out and let that capital growth increase their bank balance.
Investing in “bricks and mortar” as a medium to long-term investment remains a sound strategy as according to the ASX Long Term Investors Report 2016 residential property is the most valuable asset with the highest average annual gross return of 8%. Property is also considered more stable than other asset classes.
Planning your retirement and your financial future is never a fun topic – but believe me, nothing will ever feel as fun as the freedom that financial security can bring you.
If your old-timer wish list includes things like enjoying travel, pursuing your hobbies and being in a financial position to assist your children and even your grandchildren (by then), then no matter what age you are now – it is time to start thinking about planning for your retirement.
Key questions to think about are: how much money do you need for your retired lifestyle and how will you get it? What can you do today that represents a step toward this goal?
So while you write your bucket list of all the wonderful things you want to do before you die – please make sure you consider how you will pay for it all!
As always professional advice is vital. Not all investment properties are created equal and there are varying factors to consider depending on your goals. Seek advice to ensure you invest in a growth location underpinned with population growth, strong rental returns and planned infrastructure.