How To Prepare Well For Retirement

With more than half of Australians over 50 uncertain about their financial futures, it’s crucial to explore efficient strategies for retirement savings.

Key points

Hope Mornings‘ Ben McEachen and accountant Pete Burrows (Lower Russell and Farr) on Money: Faith and Finance delve deep into viable options, including superannuation, property investment, ETFs, term deposits, and side hustles.

Leveraging superannuation: a secret weapon

Despite the prominence of superannuation, many are unaware of or disengaged from understanding its full potential.

As Pete said, superannuation is “a good, forced savings” especially for those who aren’t actively involved in setting up their financial futures.

Starting July 1 this year, the mandatory employer contribution rose to 12 per cent, enhancing the savings potential without additional effort.

Over 50% of Australians over 50 feel anxious about achieving a comfortable retirement.

However, the real power of superannuation lies beyond passive contribution.

Burrows emphasises the importance of actively managing your superannuation: “Do I understand my statement that I get from my super fund?”

This vital step involves keeping track of where your money is, making informed choices about fund performances, and occasionally even adding voluntary contributions to maximise tax benefits.

As super funds can significantly vary, it’s advised to do your research before making switches, focusing on performance trends and personal ethical investments.

Property investment: understanding opportunities and risks

In a nation where property ownership verges on a cultural norm, understanding the intricacies of property as an investment for retirement is critical.

Property ownership is frequently perceived as a safeguarded path to wealth accumulation, yet Pete cautioned that it’s equally important to consider the downsides.

“It’s expensive to access,” he pointed out, noting that hefty costs can be involved in property transactions.

Property’s appeal largely stems from its tangible nature and the perception that property assets always increase in value.

Superannuation is a beneficial, yet underutilised, tool for retirement savings.

But property is not free of risk.

“It’s quite a lumpy, illiquid asset,” said Pete.

When making property decisions, it is wise to weigh up your financial health alongside your future retirement needs.

Amid soaring house prices, alternative strategies – such as housing co-investment or residential rental stock – might suit the more recent entrants into the property market.

Future-proofing finances with ETFs

Exchange Traded Funds (ETFs) represent an increasingly popular choice among younger investors.

An ETF offers diversification by aggregating stocks into a single fund, offering exposure to multiple stocks or indices without the need for continual oversight.

For those not keen on the granular “ins and outs” of the stock market, ETFs present a simplified investment pathway.

“For someone… who just want[s] to know they’ve got some exposure but don’t want to do the work,” Pete suggested ETFs could be a pragmatic choice.

Exploring diverse savings avenues and side hustles can diversify retirement income streams.

Benefits of ETFs include simplicity, diversification, and potentially competitive returns without needing to individually manage and research specific stocks.

Yet we need to be aware that ETFs mirror the index they follow, never outperforming it.

Consequently, ETFs lack the dynamism which an actively managed fund might offer.

You should assess types of ETFs and their historical performances before embarking upon this investment journey.

As Ben highlighted, a big challenge when approaching retirement savings in determining when “enough is enough”.

Listen to this episode of ‘Money: Faith and Finance’ in the player above.

The exact amount needed to retire comfortably hinges on myriad factors, personal aspirations, and life circumstances. Your financial wisdom for retirement isn’t just about accumulating wealth but balancing it with quality experiences, well-being and purpose in life.

When planning for the future, a combination of strategies which align with individual goals can offer security and fulfillment during retirement. Making informed and proactive choices at every stage also is important.

Listen to this episode of ‘Money: Faith and Finance’ in the player above.

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