Our strategic partner, Elston, has released a must-read article on how to retire early.
Retirement planning can often feel overwhelming, but with the right mindset and some strategic moves, you can build a future you're excited to embrace.
1. Beautiful, huggable compound interest
The power of compound interest means that even small super contributions can grow significantly over time. Employer contributions to superannuation are good, but why rely on the minimum money going in? Kicking in a little bit extra each month can have an enormous impact in the long run. The key is to make additional contributions as early as possible.
Someone who starts in their 20s or 30s is giving their super time to grow. Those extra years of compounding interest mean they’ll be able to enjoy the fruits of their labour in retirement.
The following chart compares two superannuation balances over 30 years. As you can see, a 35-year-old couple making extra contributions of just $200 each per fortnight have added $642,000 to the final accumulated balance.
Tip: Automating extra super contributions through a small salary sacrifice means there’s no need to consider it. Plus, that money will come out before tax, so it’s an effective way to save.
2. Do what you love
When retirement is decades away, it’s hard to imagine what it might look like. However, one way to think about your goal is to focus on what you love doing now. If you love travelling, eating out, and attending concerts now, you’ll want to keep doing those things when you retire.
So, you want to have an income in retirement that lets you pursue similar interests in the years ahead. You want financial security that gives you freedom of choice in the future. That’s the goal. Now, you need to design a roadmap for how much you need to save, how it’s invested and how it can be structured to provide the income you’ll need.
3. Spread the love
Being wedded to one kind of asset might not be the best strategy for investing. To thrive, investment portfolios should have a little bit of everything.
Diversification can mean investing in various asset classes, such as shares, real estate, and bonds. It can also mean having a share portfolio with balanced exposure to multiple industry sectors and companies.
For a more tailored approach, consider consulting with a financial advisor who can help you create a well-rounded portfolio that fits your risk tolerance and retirement goals.
4. For better, for worse
Marriage vows used to promise that couples would stay together for better or worse. But how many of us have thought about that means in practice? It’s easy to underestimate how quickly a health emergency can lead to financial strain.
Without the proper insurance, mortgages, school fees, and other out-of-pocket costs can become overwhelming, putting long-term assets and investments at risk.
For example, if you experience a sudden illness and can’t work for an extended period, income protection insurance can help cover your expenses. This allows your savings and investments to continue growing rather than being depleted.
5. Get Engaged
Staying engaged with your finances is crucial to ensuring a comfortable and secure retirement.
While it may be tempting to set and forget your super, regularly monitoring and actively managing it can significantly impact your financial future.
Keep an eye on how your investments are performing.
Review how your balance is travelling and see if you’re on track.
Revisit your budget each year.
Assess your insurance coverage.
See if you can afford to contribute a bit more.
Commenti