Who wants to be a millionaire?
by Alan Schoenheimer, Managing Director,
Australasia, Russell Investment Group
If you plan to retire at 60 in good health, enjoy
life to the full, and not rely on the age pension, the answer is probably
'You do'.
Sorry, I can't give you a quick and easy (legal) method of accruing
a million dollars in super, but I can tell you this: It pays to have a
clear plan. Retirement planning involves working out how much income you'll
need in retirement and where it's going to come from. A good plan
is realistic and adaptable, with specific action steps.
Here are some basic steps to get you started:
Investment strategy
Getting this right is critical. What mix of investments will ensure
you reach your retirement income goals? Unfortunately many people avoid
making a decision here because they feel overwhelmed by information and
investment options and are afraid of making the wrong choice. Yet it's
the most crucial step of all [*].
Time horizon
Clearly understand your investment time horizon. When will you retire
and for how long will your investments need to support you? Many people
live longer than the quoted 'life expectancies' indicate. If you retire
at 60, it's possible you'll live for another 25-30 years. Will your
investments last the distance?
Avoid 'quick fixes'
You can't make up for poor planning by assuming that you'll somehow
gain extra returns from the markets later on. Start early, set a long
term strategy, choose wisely who you'll invest with, and be realistic
about what your plan can achieve.
Insurance
Have sufficient insurance cover. This is one area that's often overlooked
in retirement planning.
Use the 'rules' effectively
Certain types of retirement savings products attract tax and means test
concessions. Using them effectively can stretch your savings further
(but don't adopt unsound strategies just to save on tax).
Rethink the role of the family home
As well as its key role in the Australian psyche, the family home enjoys
enormous tax and social security concessions. But over-reliance on it
is a common flaw in retirement planning which can cause you to be rich
in assets while living on the breadline. Reverse mortgages can give
you access to the equity in your home in retirement (particularly if
you're prepared to spend the kids' inheritance!).
Remember, all plans need to be reviewed to take into account outcomes
that differ from those you expected (investment returns, employment situation,
etc) and to allow for changed circumstances (higher aspirations, family
situation, etc). Reviewing is not the same as chopping and changing your
investments. It's more like getting the compass out from time to
time to check and reset your bearings.
*If you're uncertain about the best mix of investments
for you, the new Russell LifePoints simplifies this choice. Work out
your retirement date, then choose the Russell LifePoints Target Date
portfolio nearest to that date. We select investments based on your
age and adjust the investment allocations automatically as you get
closer to retirement. It's that simple. [back to article]
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on this Web site are intended for Australian residents only. Information
on this site should not be considered a solicitation to buy or an offer
to sell a security to any person. Persons outside Australia may find more
information about products and services available within their jurisdictions
by going to Russell's Worldwide site.
If you plan to retire at 60 in good health, enjoy
life to the full, and not rely on the age pension, the answer is probably
'You do'.