Whether your retirement is nearing or still a while away, it’s important to plan ahead, so you can give yourself the best opportunity to live your dream retirement when the time comes.
Inflation will still drive up the cost of living, and the same products and services will become more expensive as the years’ pass. The only difference? You would no longer have the salary from work and would be dependent on what you saved or invested in. This concern is especially challenging if you plan to retire early.
Plus, if you want to make sure your financial decisions are ethical and contributing to a better society, now is the time to plan with a sustainable, ethical financial planner.
That’s why it’s beneficial to start retirement planning today! The sooner you start planning the closer you get to achieving early retirement.
Here are 6 essential tips to help you achieve early retirement:
Plan a Retirement Budget
As retirement still involves money management, you should consider calculating how much you need in those years as early as possible.
The Association of Superannuation Funds of Australia (ASFA) calculates that single Aussies need $43,601 a year to live comfortably, while couples need $61,522 a year.
You can estimate these figures even further for your personal circumstances by using a retirement calculator. From there, spread the amount according to expenses such as groceries, bills, leisure activities, and home repairs as a means to proper retirement planning.
Create a Finance Roadmap
If retirement is your goal, how do you get there? What steps do you need to take financially?
This is where a financial plan comes in. This document tracks current expenses and loans to see how close (or far off) you are.
You may want to consider including the following tips in your financial management plan…
Finish Paying All Loans
Loans are financial burdens even in retirement.
The compounding interest rates alone will eat away the hard-earned money you saved up. Whether it’s a home mortgage or a credit card, tightening your belt now to pay off those debts can get you one step closer to achieving your dream retirement lifestyle.
Adjust Financial Goals for Savings and Expenses Accordingly
By reducing your expenses and liabilities earlier, you can add the additional money you’ll receive to your retirement savings.
If you need guidance in doing so, you may want to follow the:
FIRE (Financial Independence, Retire Early) life philosophy.
This philosophy believes in the concept of spending less now and saving more for an early retirement to provide you with more financial freedom during your post-work life.
Boost Your Super Balance (and make sure it’s invested ethically!)
Your super is incredibly important for an early retirement.
If you still have time before retiring, you may like to change your investment strategy to a high-growth performing fund.
While you’re at it, if sustainability is important to you, think about switching your super fund to an ethical investment strategy or a new fund altogether that is better aligned with your values.
A great strategy to use in boosting your retirement savings is by making extra super contributions outside of your employment super guarantee.
By making voluntary contributions you can also reduce the amount of tax you pay.
There are 2 types of voluntary contributions you can make to your Super:
- Concessional Contributions: are payments made from your pre-tax income and are tax-deductible for self-employed individuals. These contributions are capped each financial year.
- Salary Sacrifice: is where you can ask your employer to pay part of your pre-tax pay into your super fund, which is taxed at 15% (for most this will usually be lower than the marginal tax rate).
- Non-concessional Contributions: are payments made from either your savings or from your after-tax pay. These contributions are capped at $110,000 per financial year.
Remember to Invest Wisely
This tip is something of a double-edged sword, as diving head-first into an investment portfolio without any prior knowledge or research can implicate your financial goal of attaining a comfortable retirement.
A wise investment strategy provides you with more potential for an early retirement.
Your investments should be made according to your current needs to avoid creating any financial burdens. Your portfolio should consider your risk tolerance, current financial position, and your values to have investments that are completely personalised and designed to help you succeed.
Retirement Planning Advice in Adelaide
Retirement is a significant change as it means living off your retirement savings without a regular salary. To live comfortably and enjoy an early retirement, you should consider planning ahead of time. These 6 tips can help get you started!
If you have more questions about transitioning to retirement, set an appointment with us!