6 Tips for Saving for Retirement

We save for so many things in our lives, so shouldn’t saving for retirement be part of our plans too?

The great news is that Australians are in a better position than most in the world, thanks to our compulsory employer superannuation program that starts as soon as we begin paid employment.

But if standard super contributions alone are not enough to give you the retirement lifestyle you’d like, it’s time to consider the next step.

6 best tips to save for retirement

Putting away a bit of money for your retirement today, in addition to compulsory contributions, can have a big impact on your retirement balance in the future.

But before you begin, the first thing is to understand your finances today.

If it’s been a while since you’ve reviewed your household budget – or you don’t actually have one – take the time right now to get all your numbers together to see whether you’re on track to have the retirement you deserve.

Remember, being retirement-ready is more than just having a healthy bank balance.

As you’re working your finances in shape, look at other areas of your life such as your health and general wellbeing so you can make the most of an active retirement lifestyle.

1. Create a clear retirement savings plan

Financial planning for your retirement is not a ‘one size fits all’ affair.

According to Investopedia, there are four distinct phases of retirement starting from ‘peri-retirement’ in your 50s through to late retirement for those aged in their 80s and above, and each stage has its own spending requirements.

This is why it is important to have a definite savings plan that answers the question of how much you should start saving each month for retirement.

A clear retirement savings plan takes all these factors into account.

2. Automate savings

Once you know your numbers and work out how much you want to set aside for retirement, the easiest and most convenient step is to automate your savings – after all, out of sight is out of mind.

One of the best, and most tax effective ways of adding to your retirement balance is to talk to your employer about salary sacrifice.

This puts a nominated portion of your pre-tax income straight into your super. This is taxed at only 15 percent, which is likely to be much less than the marginal tax rate you pay on your salary.

The salary sacrifice program lets you put away up to $30,000 a year (including the compulsory contribution). This is a great strategy for those making a good income in a salaried position.

And did you know that for those who are over 60, these salary-sacrificed amounts are tax free, which is an even better reason to make this part of your strategy.

Automated savings is helpful outside of superannuation too. This might take the form of having other investment accounts, a good cash reserve in a high interest saving account as well as a reserve of three to six months’ expenses as an emergency fund.

3. Invest… wisely  

If your budget stretches to it, having a second investment scheme outside of superannuation is a great way to increase your retirement nest egg.

It gives you greater control of how your money is invested and when you can get your hands on the balance, which is important if the intent is to retire before the superannuation preservation age (which is 60 for those born after 1 July 1964).

The first place to invest is in getting solid advice from a licensed financial planner who will be able to recommend an investment strategy based on your specific goals and preferred risk profile.

Investment strategies can include:

• Managed investments
• Cash investing
• Direct share investment
• Property investment

You might even consider a mix of all the above.

Investing after retirement

Investing doesn’t end just because you’ve reached retirement age. In fact, investing becomes even more important since your retirement nest egg needs to last for as long as you do.

Early on, your superannuation and other investments were likely to have been geared for growth. It is a higher risk strategy subject to market fluctuations. Over time, however, the returns are greater.

In retirement, when you’re relying on income from your investments, a more balanced or conservative approach is more appropriate.

Talk to your financial advisor about whether a single diversified investment fund or having two accounts – a balanced fund and a growth fund in a ‘bucket strategy’ would work best for you.

4. Pay down your debt before you retire

With 75 percent of retirees with a mortgage owing more on the house than they do in super, it is important to look at opportunities to start early to ensure your retirement is debt free.

Paying off credit cards, personal loans, car loans and mortgage means the money saved can go directly to retirement savings – not to mention the amount you’ll be saving in interest payments.

The cumulative amount of debt might seem overwhelming at first, but there are two great strategies you can use to knock down that debt sooner.

The two most popular methods of debt reduction are:

• The avalanche: take the debt with the largest interest rate and pay it off first (while making minimum payments on the other loans) to save on interest.
• The snowball: take the debt with the smallest balance and pay it off first (while making minimum payments on the other loans) to get a sense of achievement quickly.

For large loans, such as mortgages, switching to fortnightly or even weekly repayments can save a heap on interest charges and help you pay off the loan years sooner.

Learn more about retirement spending strategies here.

5. Consider working in retirement

There’s no obligation to give up work just because you’ve reached retirement age.

In fact, reaching the superannuation preservation age may actually give you more work options.

You can consider a transition to retirement strategy in which you start accessing part of your super while reducing your working hours without reducing your lifestyle. And, you’ll still be adding to your super.

You may choose to do another type of work entirely. If you’re in a position where you don’t need to maximise your income, casual or part-time jobs are a great way to earn a little extra money and stay involved with the community.

The federal government also encourages those on the Age Pension to work if they wish to. The Work Bonus allows you to earn up to $300 per fortnight without it impacting on your pension entitlement.

6. Take advantage of government incentives

Whether you are eligible for the Age Pension or are completely self-funded, Australia’s state and federal government offers a number of concessions and discounts for those over the age of 65.

Commonwealth Seniors Health Card

This health card offers concessional rates on pharmaceuticals through the Pharmaceutical Benefits Scheme (PBS). In addition, cardholders are eligible for bulk-billed doctors’ appointments, a fortnightly energy supplement and even discount postage stamps from Australia Post.

State Government Concessions

State Governments, such as this one from Queensland also offer benefits that you can use to your advantage, including retail discount concessions, transport concessions, as well as water and council rates subsidies.

How can an over 50s resort help you transition into retirement?

In addition to superannuation, most Australians have one significant asset that can help them fund their retirement – the family home.

And there are several great reasons why downsizing to a new right-sized home could help set you up for a great retirement.

The Federal Government’s Super Downsizer Scheme allows you to put up to $300,000 per person and $600,000 per couple into your superannuation without affecting your contribution caps.

The scheme is available for people aged 55 and above.

A new right-sized home will reduce household expenses which you can use to either bolster your cash reserves or roll back into your superannuation.

Look for a lifestyle resort that has a great range of sporting, leisure and recreational facilities designed for active over 50s, which can also help you save on entertainment and sporting and gym members.

Not to mention having the peace of mind of living in a secure gated community if travel is on the plans.

Ensure that you own your home – rather than entering a loan-and-lease arrangement – and that there are no entry and exit fees or capital gains fees.

Land lease lifestyle resorts for over 50s are a great way to enjoy a holiday resort lifestyle even before you’ve given work the flick.

Contact us today for more information or to receive an information pack and book a tour.