Retirement planning and superannuation

Retirement is something we all tend to think about from time to time, but many of us are not particularly serious about saving for it. Generation Y, for instance, might laugh off suggestions that they need to consider investing for their golden years in the distant future. However the bitter truth remains that the Twenty-First Century is undoubtedly an economically evil era. Times are perpetually changing for the worst and job security is virtually a thing of the past.

A stable nest egg in this day and age of global recession and heavy superannuation losses is critical, if not mandatory, for those of us who want to retire comfortably – especially for those of us young folk who want a stable retirement in the future.

Superannuation is Important but not Guaranteed

One of the worst misconceptions about retirement is our belief that saving for retirement isn’t necessary in light of an anticipated superannuation payout. We think that by contributing to our future superannuation fund on a weekly or monthly basis that that alone cancels our need to put away additional funds towards retirement.

On the contrary, millions of hard-working taxpayers the world over have sustained unprecedented superannuation losses during the course of the global recession. Those of retirement age have been forced to remain in work longer, leading to significantly less employment opportunities for college graduates.

Reward Saver Accounts

Think ahead. The world’s economy might worsen again in decades to come, if recent circumstances are anything to go by. That is why alternatives to superannuation should be seriously considered.

Reward saver accounts enable users to receive incentives, including high interest rates, for investing small capital such as their loose change. Inquire at your local bank for more details. In the meantime, keep a coin box and place all your loose change into it. At the end of the week, take it all to the bank and deposit it into your reward saver account. Get in the habit of doing this until retirement. You’ll be amazed at how much you would have saved, especially when invested at attractive interest rates.

Avoid High Risk Investments

Do not fall victim to choosing the easy path to fortune. If you have great wealth, invest in term deposits. High Risk Investments, though tempting on account of their awesome returns, are simply too unstable. They have ultimately led to the financial ruin of millions of self-funded retirees.

Never rely on superannuation alone. Utilise reward saver accounts, and consider other self-funded nest eggs like term deposits for the long haul. Look after your money and it will look after you.

Save Money the Old Fashioned Way

Many people think that because they are not earning very much, they can’t save anything. Well, it’s not true! Regular savings, regardless of how much is put aside, not only create good money management habits but are also the only way to meet your short, medium and long term goals.

Of course, lump sum payments do come along for some lucky people, and even then, that payment often already has a home to go to such as a payment for a bill or a debt. Reality is that a healthy financial life is not easy. To be financially sound can take time, dedication and a budget.

List Short Term Expenses and Bills

Short term expenses include bills and items that need to be paid for within the next 12 months. Some examples might include birthday presents, car expenses, clothes, shoes, children’s activities, utility bills, Christmas presents, and even weekends away. By saving small amounts for these things each pay, spending will remain more within the means of earnings rather than resorting to credit card debt.

It is easier to keep each type of expense in a separate account although with mounting bank fees this may be difficult. Often, other types of banks, credit unions and friendly societies offer fee-free accounts and with the use of the internet, transfers are easily managed whilst restricting everyday access to the savings accounts.

Identify Medium Term Expenses

Medium term expenses include larger ticket items or holidays which may incur outlays at least 12 months away but within the next 1-5 years. Some examples may include purchasing a car, saving for a deposit for a home loan, or perhaps saving for an overseas holiday.

Once the balance of the account is more than $1,000 there are savings accounts available which earn more interest than regular transaction accounts. Alternatively, other types of investment accounts may be appropriate for consideration such as funds management accounts or direct investment in shares, for example.

Identify Long Term Savings Goals

Long term savings goals include long term savings plans which prepare investors for a retirement nest egg or may simply be goals for extended holidays which could occur at least 10 years away. For example, 40-year-old couples may start saving for a round the world trip to celebrate their 50th birthdays or even to celebrate their retirement.

To plan for a $30,000 holiday 10 years away means that just $215 per month needs to be saved if the yield is 3%. Most people have superannuation funds but it is also important to have some long term savings plans outside of superannuation.

For example, if $100 is saved each month for 40 years, which is how long the usual working life is, $73,000 will have accumulated even if just 2% interest rate is paid on that account. Imagine the result if the regular savings was invested in a higher yielding product over that time period!

So with careful planning, anyone can work towards good money management.

Budget for everything. Even the irregular haircut! Know how much is available to spend at any one time and stick to the budget. Stuff the latest trends – who cares! Be an individual. Furthermore, the kids will survive without the latest technology and so will their friends.

Remember, putting just $5 into a child’s bank account every week from their first week of birth will provide them with over $5,000 at their 18th birthday. That’s more than enough to buy their first car and give them some independence.