Boost your retirement savings with these useful tips

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March 05 2020
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According to the Association of Superannuation Funds of Australia, couples will require $640,000 in retirement savings for a comfortable retirement, while singles need $545,000.

The ASFA retirement standard figures above are estimates based on expected expenses in retirement, so they may be a large amount if you have a low-income household. However, there are still ways to grow your retirement nest egg regardless of your target retirement age.

Consider the five tips below.

Tip #1: Plan early

It’s advisable to plan for retirement early – doing so would allow you to make necessary adjustments to your lifestyle before a lasting financial damage is done.

Develop good financial habits
Planning early may help you visualise how your lifestyle and spending habits can impact the growth of your retirement savings. Knowing the potential consequences may help you make objective financial decisions – or at least give you a reason to develop good financial habits, such as saving money and spending smart.

Be consistent
Consistency is one of the crucial keys to growing your savings – consider topping up investments regularly so that your super balance can benefit from compounded interest.

Likewise, review your portfolio regularly to ensure that your investments and objectives are aligned.

Time value of money
Time value of money (TVM) suggests that the money you hold in the present is more valuable if used as a principal investment compared with the same amount received at a later time.

This idea is that if you invest the money you hold today, it has the advantage of increasing in value from investment returns, thanks to simple or compound interest.

Basically, TVM expresses that “an investor’s time in the market is more important than timing the market”.

Tip #2: Review your super fund

The sole purpose of superannuation funds is to secure retirement benefits, but not all funds are equal. Is your super working to achieve your retirement goals? If not, it may be time to switch to another fund.

Make sure to do due diligence before choosing a super fund. Remember that contributing to a fund that isn’t appropriate for your financial circumstance and retirement objectives may not help you achieve your retirement goals.

Always consider your retirement objectives for any financial decisions that may affect your retirement savings.

If you simply chose a super fund without reading its product disclosure statement – a document that indicates the fund’s features – find your copy and review it now.

You may also ask the fund manager.

Tip #3: Find ways to increase your income or contributions

Once you generate a steady income, make sure to keep your spending below your after-tax dollars by following a sound budget and spending plan.

Consider contributing more or maximising your super contributions through salary sacrifice or non-concessional contributions. Your extra contributions can mean tens of thousands of dollars in additional retirement benefits as a result of TVM by the time you reach preservation or age pension age.

In turn, this would minimise your longevity risk because you may receive retirement income longer.

Tip #4: Consider investing outside of super

Investing through super is currently one of the most tax-effective ways to invest. However, you may also consider investing outside of super if you have the means to do so because access to your super account is restricted.

The only time you may access your contributions is when you satisfy a condition of release, such as reaching preservation age, full retirement or on compassionate grounds.

Tip #5: Seek professional advice

A licensed professional can help you work out ways to increase your savings, decrease your expenses and taxes, and optimise your portfolio.

When in doubt with your plan or decisions, consider seeking advice from a retirement, investment or financial professional.

However, make sure that the person you speak to is licensed to give the type of advice you need. Some financial advisers are only allowed by law to provide general advice without taking your personal circumstances into consideration.

Explore nestegg to learn more ways to prepare for retirement.

About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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