Retirement has become a big issue at the moment as it is predicted that many Australians will have to stay in the workforce longer than they’d like to.
According to a recent study by Suncorp Superannuation, “in the next decade, 2.6 million Australians will need to work their entire lives out of financial necessity.”
So, what is there, apart from contributing more to super, that you can do now to enjoy a comfortable retirement. Even if retirement is still 30, 40 or even 50 years away, it’s never too early to create a plan.
Many Australians are learning how to become financially independent during their 20s, making this an important time to think about what your financial goals are and work out how you are going to reach them. If you are hoping to own your own home in the future, your 20s is when you should start saving.
According to the Genworth Homebuyer Confidence Index (Sept 2013), 25% of prospective first home buyers have been saving for a deposit for more than three years. The more you can save for a deposit now, the more beneficial it will be in the long run. Many lenders reward borrowers who have a large deposit with more competitive interest rates.
A big part of saving for a home is getting all of your finances in order. Come March 2014, lenders will be able to see the past 24 months of repayments for ongoing financial commitments like credit cards and personal loans. How you manage your money now will affect your chances of getting a home loan in the future.
At this stage of your life, you may have settled down with a family and a stable career and have definite personal and financial goals. If this is the case, it may be a good time to start thinking about purchasing a property.
However, before you purchase a home or obtain a home loan, it is important to do your research on the following points:
Property Location: You will need to consider what things are important to you, for example, proximity to schools, work and shops and also what the neighbourhood is like. If you find a property at a great price, but takes an hour to get to work, is it worth it?
Property: It is important to see what other houses in the area are selling for to ensure you are not paying too much. Our free property report can show this. Also, to avoid buying a lemon that may end up costing you extra money down the track, make sure you organise a building and pest inspection.
Home loan: When looking for a home loan, make sure you compare more than just the interest rate. The comparison rate will give you a better idea of how much you will be charged as it includes fees as well. It is also important to compare features to see which one will enable you to pay off the loan the quickest.
If you have bought a home and now have a mortgage, your 40s should be the time that you focus on repaying as much as possible. Remember, the more money you can put towards your home loan, the quicker you can repay it and be financially free.
An offset account and free redraw are beneficial to have as they can help you save interest. An offset account is a separate account connected to your loan and by depositing funds into this account; it will help decrease the amount of interest you have to pay. You can also use this as an account for everyday transactions. Free redraw allows you to pay extra into your loan while still having access to it via redraw if needed.
There may be times where you feel like you cannot afford extra repayments, but it will be worth it if you are able to pay off your home loan before retirement.
Although most home loan terms are 30 years, if you have put in the effort to make extra repayments on your mortgage, the amount owing should have reduced considerably or you may have repaid the loan completely. If this is the case, now is the time to think about directing some of your income towards investing.
According to a study by Suncorp Superannuation, in the next decade, there will be a 52% increase in the number of people over 65 in the work force. Investing can provide you with passive income and can help support your lifestyle during retirement.