While you work to live, you don’t want to work for a lifetime. You can ensure that you can still live decently after retiring with enough money to pay for your bills.
Here are some top ideas on how to start saving for your retirement funds and the options you could take.
What are retirement funds?
Funds allow people to save a certain part of their salary after retiring for future use. It ensures a regular financial source and a balanced, decent financial situation. In Australia, citizens are required to save 9.5% of their salaries into a tax-free superannuation account.
Retirement Investment Options
To access your super, you need to reach the preservation ages from 55 to 60. The following are your investment options in Australia.
Transition to Retirement (TTR) pensions
A TTR pension allows you to access some of your super savings upon reaching 55, even while receiving regular earnings from your current employment. Since you can withdraw money from your super fund, you will have greater flexibility in your finances.
Lump sum superannuation
After gaining access to your super fund after retiring, you can get a one-time payment for it, which you may use to invest in personal assets or stocks portfolio. However, your super is subjected to tax, so a lump sum super may not be always the best choice.
This provides you with a regular pension from your super savings after satisfying the release requirements. You will be required to withdraw a minimum amount from your account-based returns every year, but there is no limit on how much you can take out.
Fixed-term annuities provide a series of payments over a certain time, while a lifetime annuity extends until your death. The amount you may receive is balanced on the amount you saved and the economic and demographic factors.
The Australian government website describes it as “seeks to achieve a ‘comfortable’ retirement income.” You must have at least 10 years of residency and at least 66 to qualify.
Advantages of having retirement savings
Here are some benefits of having investments:
1. Save up early and enjoy the compounding effect of balanced reinvestment performance.
2. Get top assets and property protection to support your lifestyle or cover emergency financial risk.
3. Ensure smooth transitions during important life and risk changes like job relocation or career change.
4. Enjoy tax benefits like reducing taxes and fees owed on balanced investment performance.
5. Have emergency funds to cover unforeseen situations like hospitalisation or medical fees.
6. Earn a significant value of assets in the future.
What is a good retirement fund?
Most experts advise having about 80% of your pre-retirement salary. The right investment option provides performance financial freedom depending on what you plan to do upon retiring. However, you must overcome some challenges.
Primarily, retirees living on a fixed salary will have a hard time supporting the rising living cost due to inflation. Annual inflation will make $1,000 worth $700 after 10 years.
On average, Australians tend to live for another three decades after leaving work. When you withdraw 4% annually from a $300,000 savings, it will only last for another 25 years.
This needs balanced retirement planning, so you can still leave a legacy for your family. Also, retirees are urged to save money and have a balanced investment beyond super. It is important to find a relevant product disclosure statement or get help and personal financial advice from a top broker before investing to ensure stable returns and performance from a balanced investment.
How to Start Saving for Retirement Funds?
Experts advise saving as early as possible. Here are some information on how to save for your balanced funds.
- Set Goals
Set a schedule for balanced deposits, regardless of the amount. After which, your top goals are increasing your returns by getting another work or one with better compensation and eventually cutting your debts and fees year after year.
- Start Small
Your super and saving plans should align with your needs. You can begin with $250 or $500 a month. The key advice is consistency and having a balanced investment option. You can also set automatic deductions to your accounts out of the programs for retirees set by your company.
- Venture on Investing
With a higher salary and savings, you now have enough personal finances to trade in for an individual retirement account, levelling up to investing. For newbie investors, you may place a small amount into a mutual fund.
Retirement funds aim to secure a much comfortable life in the future. It is important to search for information for your investment options to have long-term, balanced investment decisions.
Please check our website regularly as Aged Care Weekly provides helpful information about retirement plans and investments.