Retiring rich is easy, until you’re old. Then your wrinkly old hands are tied to whatever assets you’ve accumulated in your taught skinned youth.
This means you should be thinking about your retirement sooner not later. It’ll be one of the best financial decisions you ever make, and is much easier than you think.
Ditch dodgy debts
If you’re spending more than you earn, have no savings and your credit card bills are eating up most of your pay cheque, it’s time to face up to some uncomfortable truths.
Well, one truth really: you’re going backwards.
Living within your means is the first step towards retiring rich, so do whatever it takes to pay off your loans and get back in the black. Ask for a pay rise…change jobs…give away your cat…whatever it takes.
Once you’re on top of your finances, you can start to build some savings and funnel any extra cash into assets that will build your wealth over time, like shares or property.
Boost your super and take a tax break
If you’re looking for a more-than-comfortable retirement, think about kicking some extra money into super.
If you do this through a salary sacrifice arrangement, money you would otherwise pay to the tax man will find its way into your super account.
You see, before-tax super contributions (up to a certain limit) are only taxed at 15 per cent, not your marginal tax rate. Plus, salary sacrificing actually reduces your gross income, which means you’ll pay less income tax too.
Whether this strategy will work for you, and how much to sacrifice, is all dependent on your personal situation. So do your homework or get some advice before going in guns blazing.
Take some (calculated) risks
When you’re young, time is on your side investing, particularly for that money sitting in super that you can’t touch for decades anyway.
Old folks who are close to retirement are generally pretty risk averse when it comes to their retirement savings, as they need certainty around how much money they’ll have to live on when they clock off work.
This means they put more money into assets that provide mediocre returns but have much lower risk of dropping in value, like fixed interest securities and cash.
Young people, on the other hand, don’t need to worry about living off their super in the next few years so can generally afford to put more of their money in riskier growth assets like shares. Because, while the share market can be pretty volatile in the short-term, over the long-term there has been a clear upward trend.
Morningstar data shows the Australian share market returned an average of 11.1 percent per year over the last 30 years, with dividends reinvested, and that includes a few financial crises and a GFC. So do yourself a favour and log in to your super account and see what investments are in there.
If you’re comfortable rolling the dice a little, why not consider whether the growth or high growth option is right for you.
Watch it grow
The last bit involves learning to give a shit about your retirement savings.
Don’t fall into the trap of thinking it’ll take care of itself. It won’t.
Take an active interest, and to make things interesting, watch it grow. Jump online and see how your balance is going each month or two.
Look at your investments and take a passing interest in the business section of the paper. When you’re aware of the money you have on the line, things quickly become interesting.
Sound simple? Then sort it out and get on the path to retiring rich today.