Tomorrow’s retirees need a plan to do so comfortably and property investment is one solution.
According to the Australian Bureau of Statistics, only 10.7 percent of Australians who retired from the labour force will have a total gross weekly household income of $1,500 or more. With the retirement age creeping up, DPN recommends that tomorrow’s retirees need a plan that includes super, supplemented by passive income from other investments.
Increasing the retirement age
The 2014 budget outlined Federal Government plans to lift the retirement age to 70 by 2035. This resulted in discussions that the superannuation preservation age would increase to match. While the current retirement age sits at 66, it will increase by 6 months in mid-2012 and to 67 by mid-2023. The impact of this means there’ll be more time for investments to grow, but less time to spend the results. Therefore, the key is to plan earlier and smarter.
What you need to retire comfortably
The Association of Superannuation Fund Australia’s definition of a comfortable retirement is $43,601 a year for singles or $61,522 for couples aged around 65. However, your expectations are likely to be higher. If you want to earn $80,000 p.a. in retirement, you’ll need to be mortgage-free and have $2,000,000 in investments, based on a 4 percent return. With inflation at 2 percent, in 17 years’ time, this equates to an annual income of $112,000 from a $2,800,000 portfolio.
Plan earlier and smarter
Many Australians rely on accumulation-based savings, whereby it’s unlikely financial goals will be met by retirement. The alternative is to earn money from assets including direct shares, high-interest savings accounts, extra super contributions, term deposits and property investment. Property growth helps you build sustained wealth, especially by structuring the purchase of multiple rental properties into your investment plan.
For working examples and further information, see DPN’s article: How property investing can help you retire in comfort.
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