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Don't let the grass grow...unless of course you want to live below the poverty line in retirement?
At our last investment workshop we spent a fair amount time discussing how much people need to live in retirement.
Did you know that the aged pension is currently $644.20/fortnight for a single and $971.20/fortnight for a couple? Which equates to around $16,749 and $25,251 respectively.
A lot of people think their super will provide for retirement but let's look at an a example of a person earning $80,000 per annum with about $50,000 in super and about 20 years to retirement.
Assuming their fund was performing at about 8% per annum (which most funds haven't done for the last few years) and they continued to earn the same level to retirement they would end up with around $268,000 in today's dollars.
Now we will be generous and assume they can invest those funds and achieve an 8% return which equates to $21,440. Still not much to live on is it? Even if you had $100,000 in super that still only achieves $365,000 in today's dollars equating to an income of $29,200.
But what if you salary sacrificed an extra $100 a week into your super surely that would make a big difference? Well it would get you to about $491,000. So an income of $39,280.
As an exercise we got everyone to write down their current position and then do a couple of projections off that to arrive at a likely income figure they would have in retirement.
I didn't want to single anyone out to tell me what number they came up with. But I did ask for a show of hands of who was happy with the number sitting at the bottom of their page. Not one hand went up.
I wonder what number you would come up with? And if you would be happy with that number? The table below provides an estimate of the amount of net investable assets you would need in 20 years time to achieve a certain income in today's dollars. By net I mean net of any debt.
How are you looking? Are you on track to hit any of these numbers? If you're not are you going to do something about it? Or will you do what most people do -
"I'm too busy to think about it at the moment" "We'll have a look in 6 months" "We'll wait until after the (election, the budget, Christmas etc)"
Well here's the cost of inaction. In the last quarter
So how can you get there? We believe property provides a safe and affordable way to build your net wealth. Historically property doubles in value every 7 to 10 years. Let's say you buy 1 property today for $400,000 and your loan against the property is $400,000. If the property doubles in value every 10 years then in 10 years it is worth $800,000 and in 20 years it will be worth $1,600,000. Less your $400,000 loan gives you a net value of $1.2 million.
It's hard to believe but that's what property doe. Look at your own home what's it worth compared to what you paid for it? Ask your parents, ask your grand parents. Look at last week-ends Sunday Mail where they had 10 years projections for every postcode in
But you have to take action The reality is if you want a lifestyle that's going to be above average you need to take action. But the key ingredient is time. So you have to take action NOW.
The sooner you act the sooner you are moving towards your goal.
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The information provided is general in nature only and is not a substitute for independent professional advice. We disclaim liability to all persons or organizations in relation to any action(s) taken on the basis of this information, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of this information. |
