Retirement should be a time of freedom and excitement. It's a time to do everything…
Thinking about the future can sometimes be scary, or it could be exciting. But regardless of how you feel about the future, it is crucial to plan for it. We may not know what the future holds, and we may not be able to control it. But by making the right decisions in the present, we can make our futures brighter.
One way to ensure financial security in the future is through retirement planning. It’s essential to save up for retirement as early as now. But sometimes, saving money for retirement can prove to be challenging, especially if you have bills and loans to pay. Luckily, there are ways to make saving for retirement a lot easier.
The concept of the sleep test is simple. It gives you perspective about an investment by answering the question, “Can you invest and sleep at night?” If the thought of the investment is making it hard for you to sleep at night, it may be too risky for you.
When it comes to investments, as the expected return increases, so do the risk. But on the other hand, that also means that low-risk investments are likely to have low expected returns. So, you have to assess what risks you’re willing to take.
People have varying risk appetites and one’s risk appetite often has to do with their age. Typically, younger people are more willing to take financial risks because they have time to recover if an investment fails. However, when one gets closer to retirement, they become more risk-averse.
It’s always important to consider the risks involved when making an investment. With super funds, there is a range of options to choose from with varying degrees of risk. So, go with the option that feels right to you and lets you sleep peacefully at night.
One way to make saving for retirement easier is to use compound interest to your advantage. Compound interest allows money to grow faster and you can get the best rewards from compound interest if you invest earlier.
You can calculate the super balance’s rate of return based on a potentially higher balance over time since your employer will be making contributions. But the thing is, your investment returns can also make your super balance rise. Essentially, you’re getting returns on your returns each year. With this in mind, you can maximise your savings by starting early or making extra contributions.
Tax Benefits in Super
Understanding Australia’s superannuation system can play to your advantage. In particular, it’s important to be familiar with the tax advantages involved.
Holding investments inside of superannuation and some contribution strategies can be advantageous to your tax position if done right. However, superannuation regulations are constantly changing so it’s best if you seek professional advice to ensure you don’t end up with a tax bill for your efforts instead!
Retirement planning is essential if you want to have a secure and comfortable future. Part of retirement planning is saving as much as you can as early as you can. It may prove to be difficult at times, but there are ways to maximise your savings, such as following the sleep test, taking advantage of compound interest, and making the most of the tax benefits in super.
To learn more about how to have a comfortable and happy retirement life, check out these posts:
- Why Hiring a Retirement Planner Is Worth the Money
- 3 Myths About Retirement in Australia and Why You Need to Know the Truth
Plan for your future with the help of Coastal Advice Port Macquarie. We are financial advisers in Port Macquarie that specialise in a broad range of financial services to bring you a comprehensive, personalised financial plan to help you experience financial freedom. At CAPM, we believe that everybody deserves access to quality financial advice so they can have peace of mind and achieve financial security. Book a complimentary meeting today!
Disclaimer: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Coastal Advice Port Macquarie, and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.