Can you afford to retire?
Right now, the annual living expenses for a couple in retirement living a comfortable lifestyle is $61,522 according to the Associate of Superannuation Funds of Australia and for singles it is $43,601.
But if you're in your 30s and have another 30 years ahead of you, that figure, when adjusted for inflation and additional cost of living expenses, grows to $136,818.16 for partners and $96,963.83 for singles in today's money.
All evidence points towards starting your retirement plans early
“5 things I wish I was told about saving for retirement”
1. Super alone can’t do all the heavy lifting
The downside is that annual contribution caps on super make it hard to build very large balances. That's why it's still important to grow separate investments outside of super.
2. Be realistic about returns
A study of global investors found human beings almost universally have overly high expectations for investment returns. In Australia, 27% of people expect to earn 10-14% each year on their investments, and that's just not realistic over the long term.
As a guide to more likely returns, figures from SuperRatings show that ‘balanced’ super funds, which spread their money across a variety of investments, have earned an average of 7.3% annually over the last 27 years since the Super Guarantee was introduced.
Some years will dish up big gains. Some will bring losses.
By investing for the long term, the highs and lows even out to deliver more achievable average returns.
3. Keep an eye on fees
Investment fees demand just as much attention as returns.
After all, you’ll pay fees regardless of whether an investment makes or loses money.
However index funds in general contain the good & the bad & there is debate on a down bear market on their performance.
4. Don’t let emotions drive investment decisions
Seven out of ten Australians admit that their investment choices are driven largely by emotions. This can lead to some dreadful decisions.
It's possible to take the emotion out of investing by setting long term goals.
Know what you're aiming for, and stay focused by building a diversified portfolio of investments.
Check the daily share market results for news by all means, but don't make knee jerk decisions based on short term movements.
SMSF have generally had a disappointing performance as trustees are not professionals.
5. Start today
No matter which life stage you're at, it can feel like you don't get paid enough to start saving and investing.
The thing is, there are always going to be demands on your money.
Getting into the habit of investing – even small amounts – from an early stage, makes it a lot easier to grow funds for retirement because compounding returns do more of the hard yards over time.
With planning and some commonsense, it's amazing how we can all get rich for retirement – slowly.
Some ideas from a recent email to share with you
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John McAuliffe
