When we first start out in the workforce, retirement often seems a long way off, after all, most of us will have a career spanning 40 or even 50 years. The problem is that as time goes by we get caught up with buying a home, raising a family, and doing all the things that make life rewarding. Planning for retirement can be pushed to the back burner. However new research shows the idea of laying foundations for retirement from an early age is gaining traction.
According to the latest MLC Quarterly Wealth Sentiment Survey, Australians aged under 30 have listed setting aside more cash, investing in property and increasing their super contributions as the three most important factors to consider when thinking about retirement funding.
It’s a sign of growing awareness about the importance of planning for retirement. That’s a good thing because the same study found 36% of Australians aged over 50 regret not putting away more cash. A further 35% said they would increase their super contributions if they had the chance to plan for retirement again.
These regrets are worth heeding because when planning for our senior years takes a back seat, the quality of our lifestyle in later years can suffer.
There are simple but effective steps we can all take throughout our working lives to become financially secure in retirement. The key is to focus on your home, your super and investments held outside of super.
In terms of your home, I am a firm believer that we should own our home debt-free at some stage, certainly by the time we retire.
Getting to know your super from an early stage will also have a major impact on retirement wealth. Chase up any forgotten or lost super accounts and consolidate them into a single balance with your preferred super fund. If you change jobs, take your super with you by letting your new employer know the details of the fund you would like your regular super contributions paid into.
If you have some spare cash, think about making an extra contribution to your super – don’t just focus on paying off your home early. In today’s low interest environment your super is likely to earn a higher return than the interest rate you’re paying on your mortgage, and those returns will compound over time to give you more money to live on in retirement.
Finally, explore the world of investments that is available to all Australians. A rental property is an extremely popular investment choice nonetheless it pays to diversify beyond bricks and mortar. Some investments, like Australian shares, offer the benefit of a regular income through dividends coupled with the potential for tax-friendly, long term capital gains.
I’m a big fan of leading the life you want to live, but one that doesn’t involve hoping the future will take care of itself. The day will come when you finally stop working, and the small yet important steps you have taken to steadily build wealth will pay off.