5 Ways You Should Be Planning for Retirement
Have you thought about what you would like to do when you retire? Whether it’s spending more time with family, travelling to exotic destinations, or pursuing your hobbies, retirement is your reward for having worked hard all those years.
But did you know that only 44% of Australians who are aged 40 and over feel like they’re prepared for retirement?
Even more sobering is the fact that more than 50% of retirees expect that they’ll outlive their retirement savings.
It doesn’t matter if you’re in your twenties or in your forties, it’s worth knowing how to prepare and live well in your golden years.
While You Are Still Young
As someone who is many decades away from retirement, you are in the perfect position to make a difference in your financial future. Apply the two tips below to your life now, and you’ll reap the benefits in retirement.
1. Build Good Habits
Start by living beneath your means. If you take home $1,049 weekly, put aside a portion of it in the bank and live on the rest. Make it a habit to spend less than you earn — this might mean shopping without credit cards or saying no to impulse buying.
Open a savings account early on. If you start at the age of 20 and save roughly $581 each month until you reach 60 years of age, you’ll have about $545,000 if you put the money in a savings account that draws a modest amount of interest.
Seek guidance from financial experts so you are confident that you only borrow what you can afford. Just because you’re approved for a sizable home loan doesn’t mean that you’ll be able to comfortably afford the monthly mortgage payments and still build on your savings.
2. Build Your Wealth Early
This gives you more time to accumulate the funds you’ll need to carry you through your post-work years. Start out by getting a clear picture of where you currently stand financially by listing your assets and liabilities.
Make it a point to pay down your credit card debt as quickly as possible. Afterward, take the money you’d normally use to pay them off and invest it. Make an appointment with a financial advisor so you can plan your investments to maximise your gains.
When You Are a Decade or Two From Retirement
Just because you’re nearing retirement doesn’t mean you can’t still make changes that will free up the funds you need to enjoy this new stage in your life.
1. Relocate to Where the Cost of Living is Not High
If you are open to relocating to an area where the cost of living is lower than what you’re paying, you could save a great deal of money toward your retirement.
When searching for the best place to retire, consider your finances, your health, your distance to your extended family, and the recreational activities you want to pursue when you retire.
2. Downsize Your Home
Downsizing your home is another way to reduce your monthly expenses so you can put away more funds toward retirement. Not only is your mortgage likely to be less if you move into a smaller home, but choosing a smaller home can also reduce your maintenance costs.
3. Refinance Your Mortgage
It’s a myth that refinancing a mortgage isn’t possible if you’re an older adult. In fact, it’s illegal for lenders to discriminate against applicants based on their age. That being said, many lenders are reluctant to finance an older person’s mortgage because they think it’s less likely that the loan will be repaid.
To appeal to lenders, and demonstrate that they are not putting you into a credit contract you cannot reasonably expect to repay you should have a sound exit strategy.
For example, if you are 60 years old and apply for a 30 year loan term (which is generally standard) they will want to see evidence and a plan on how you intend to meet the repayments post your retirement age. Perhaps you’ll work past the typical retirement age, use dividends from investments, and/or sell some assets.
Whether you’re starting late or have yet to begin preparing for retirement, the key is to prepare for it now so you can have the retirement you’ve always dreamed of.
This takes time, commitment, and effort, and it can be an overwhelming endeavour too. To make sure you’re on the right track towards achieving your retirement goals, get financial advice on retirement planning and work out your retirement strategy.
Disclaimer: This is general information only and should not be taken as financial advice. Please speak to a Shore financial planning professional before making a decision on your home loan.