Retirement can be a tricky subject.
It's something you should think about, but it seems so far away while you are young. Retirement is a problem for tomorrow, let's leave it until then, right?
Saving for retirement is something that can begin as soon as you start working for a living, and in Australia, you might want to consider starting as early as possible, according to a recent report.
The world of retirement savings
Thanks to a recent report by HSBC, we can see valuable insight into the state of international retirement savings. In the report, titled ‘Life after work?‘, 16,000 people were surveyed across the globe, including on our own turf here in Oz.
Some of the results of this survey were somewhat ominous for future retirees, as it shows that we might not be as prepared as we think we are.
- 12% of those polled believe they will never be able to retire
- 64% of semi-retirees polled wish they had saved for longer
What's striking about the results, when combined with these statistics, is that people – especially young people – still expect to retire at a younger age, however might not have enough retirement savings to fund their retirement. This means that they would need to rely on some form of government support. The problem is, you cannot access government retirement support until you reach the Designated Retirement Ages (DRA). Specifically, survey respondents suggested they felt age 59 was when they would retire – a whole 11 years prior to our country's proposed future DRA!
Related: Do we need a retirement age?
What can we learn from this?
Despite a lot of the doom and gloom, there's still a lot we can learn from all of these statistics. For example:
- Plan your finances: Juggling finances can be a precarious balancing act. However, planning what you do with your pay cheques, and prioritising your money, could go a long way towards a happy retirement. Research by Rice Warner suggests there is a large gap between what Australians will need to retire, and what they actually save. In June 2013, they estimated a gap of $727 billion! The HSBC report shows that 35% of people did not plan sufficiently for their retirement, and 21% still had debts to pay. If you plan what you spend carefully, you can minimise your debt – even on a low income
- A little for a lot: Contributing little by little as regularly as possible to your super account could amount to a lot by tomorrow. Imagine a cup of coffee costs you $5, and normally you buy one every day. Let's say you are 21, and you'll retire at 70. If you put that $5 per day into super instead – either from your own pocket or a salary sacrifice – you could have saved nearly $90,000 by the time you retire! Even if you still buy half as many cups of coffee, that's still $45,000. Superannuation offers you a good potential to grow your money over longer periods of time, and you could be exposed to the beauty of compound interest, again helping to boost your retirement nest egg
- Know the costs: Knowing how much it will cost to retire in Australia could help set a benchmark for your super fund
Twenty-nine per cent of retirees who did not have enough for retirement simply didn't know how much they would need, and 65% did not realise they didn't have enough until they were already retired. If you know what you'll need, you might find it easier to focus on the goal, and begin saving as young as possible.
What to consider
Choosing the right fund to invest your super is a key step to a happy retirement.
If you already have Virgin Super speak to a financial provider and review whether you have the right investment mix for your needs.
If you are considering Virgin Super, our two investment plans – Virgin Super Plus and Virgin Super Essentials provide options to suit all levels of financial knowledge and budgetary requirement, meaning anyone on any income can save for the future without stress, or even a strong knowledge of how to invest.
How are you getting ready for retirement?