5 retirement planning strategies from Sydney financial planning expert
While you are young, retirement can seem a long way off, and it can be a tough decision to start putting money away for a future that right now looks light years away. All too soon though, life happens, and we soon find ourselves wondering where all the time went, and retirement is looming on the horizon.
Martin from Blue Diamond Financial and our Top 3 Local Business Pick for Sydney financial planning services provides the following advice and motivation on why you should start your retirement planning sooner, rather than later.
1. Start your retirement planning early
The guiding motto Martin uses for his financial service is “planning today for your ideal tomorrow.” Of course, the underlying message is clear; you need to start your retirement planning now, and the sooner you start, the better your results will be when it comes time to put your feet up and enjoy your twilight years.
The magic of compounding means that it is much easier to fund a more comfortable retirement when you are 25. Waiting until you are in 30’s or 40’s can mean you miss out on thousands, if not hundreds of thousands of dollars in retirement funding, simply by starting your plan 10 or 20 years later.
2. Consider how much is enough to retire
According to Martin, Sydney financial advisers will use a number of variables when calculating how much income you will need for retirement.
As a guide, a single person living a modest lifestyle will need $27,368 per annum to cover their living costs. If you are planning for a comfortable lifestyle, then that figure rises to $42,764 per annum.
Couples aiming for a modest lifestyle will need $39,353 and couples who are wanting a more comfortable retirement should aim for $60,264 per annum.
A modest lifestyle is one that is slightly above living on the pension and only allows for basic needs and activities. A comfortable level of income will allow for the purchase of a recent car, household goods, private health insurance, good quality clothes, the occasional overseas trip, and the ability to purchase electronic equipment.
3. Calculate your magic retirement number
Naturally, if you plan on doing lots of travelling, then your retirement figure can rise significantly. Plus, the previous values are based on owning your own home, retiring at age 65, and a life expectancy of 85.
The numbers are also based on what a dollar can buy in today’s money.
If your retirement is 30 years away, you should compound the figures by 3% (an average inflation rate) for every year until the year of your departure from the workforce.
Martin says that calculating your magic retirement number isn’t all that difficult when you use the following algorithm.
Step 1: Take 70% of your current wages and then multiply by the years you have remaining until you leave the workforce.
Example: 70% of $78,000 = $54,600 x 35y = $1,911,000
Step 2: Add all of your assets together (exclude the family home) including cash, super, investments etc., and then subtract all of your debts such as credit cards, mortgage, personal loans, etc.
Step 3: Take the number you get from step 1 and subtract it from the net wealth you get in step 2. You now have your current magic number for retirement.
4. Mind the shortfall
Martin reminds us to “mind the shortfall.” A portion of our wages goes into our super fund, but the final figure we will have versus what we need is known as a shortfall. Shortfalls can occur when you are employed in lower paying positions, or you are out of work for any length of time.
Women can also miss out on payments when they take time off work for maternity reasons and then return to work at reduced hours for a few years while the kids are in school.
Financial advisers, Martin included, recommend you top up your super with extra payments so you can compensate for any shortfalls you accrue throughout your working life.
5. Boost your super
Sadly, many Australians will come up hundreds of thousands of dollars short on achieving their super goals, but Martin says that once you know your retirement goals, there are things you can do to ensure you reach them.
Strategies which can help boost your super include making extra contributions, shopping around for the best super plans, opening a high-interest savings accounts, or adding another investment to your portfolio.
Working longer, salary sacrificing and downsizing the family home are also excellent strategies for giving your super a massive boost. Once you reach retirement you can also consider working part-time, which will give you extra income, and keep your brain active.
Follow the above steps and you should be able to avoid the Australian trend of running out of retirement funds 13 years before your demise on average.
Get more financial tips and expert advice from Martin right here
You can get even more sound advice from Martin by visiting his page and check out his latest informative videos by clicking right here.
About Martin Cossettini from Blue Diamond Financial, Castle Hill
Martin Cossettini from Blue Diamond Financial brings a unique wealth of financial advisory skills to the Australian market that makes him on top among the other financial planners.
With over 25 years of banking and finance experience as well as 15 years of working internationally in London, he is passionate in financially educating individuals and families, whilst always placing his client’s best interests at the core of everything that he does.
Martin is based in Sydney’s Hills District, and happy to travel to clients all around Sydney. He offers a FREE financial advisory consultation and aims to make your financial situation better than your present one.
Click here to see Martin’s Top 3 Local Business Pick profile.
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