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When and How to Start Investing
I am passionate about my work and really enjoy it, but like most people I am looking forward to retirement. I am looking forward to the opportunity to spend the entire day enjoying the company of family and friends, to travelling in style and sampling wonderful delights created by talented chefs (a category into which I do not fit).
Our dream lifestyle – often called retirement – is something that many of us live for. But will we ever get it? Will we spend 40 years of our life working hard to make ends meet, and be left with a lifestyle lower than when we were working?
Over 69% of Australians aged over 65 rely on government pensions for the majority of their income.^ Effective 20th September 2005 the maximum pension that a couple will receive is $408.20 per fortnight each. That is a combined amount of $21,226 per year. Will that be enough to fund your dream lifestyle?
The statistics will be different in 20-30 years when you retire.
- Very few Australians will be receiving pensions as the government cannot afford to pay the pension to our ageing population.
- Many Australians will be relying on their Superannuation to provide them with income.
Superannuation alone will not be enoughA person on the average wage of $52,000 p.a.^ receiving 9% super guarantee payments will have approximately $330,000 in Super after working for 40 years (today’s dollars).^ That will not be enough to fund the same lifestyle for 20 years in retirement.
It need not be that way if you use time, and specifically the power of compounding to your advantage. The trick with compounding is that the earlier you start saving, the less you need to save to achieve the same lifestyle outcome.
For example, if that same person saved an extra $20 per week into their Super before tax, they would have an extra $74,000 after 40 years. Extra money at retirement that may be used to improve your lifestyle or make your lifestyle last longer. All that benefit for only 2% of their salary, an amount that wouldn’t be missed. (After all, many people state that a pay rise of only 2% makes no impact to them.)
So when should you start saving?NOW! To help you start FinDre Financial Planning offers a Retirement Lifestyle Adequacy Analysis to help you assess if you are on track to achieve your lifestyle dream, and if not how much you need to start saving.
Now you’ve decided to start saving for your retirement, where do you start?
Footnotes
- ABS Cat 6523, Household Income and Income Distribution, Australia, 2003–04
- ABC Cat 6302.0, Average Weekly Earnings, 18th August 2005 Assumes earning rate after fees and taxes of 7% per annum.
- Calculated using the calculator provided by ASIC at www.fido.gov.au, version 5.
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Matt Hern trades as FINDRE
(Empowered Wealth Pty Ltd t/as)
ABN: 21 592 525 720
Phone: 08 9467 7320, Fax: 08 9463 7848
PO Box 259, Bull Creek, Perth, Western Australia 6149, Australia
Website: www.MattHern.com.au
Blog: www.Money-Guide.com.au
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