What I Say To Friends And Family When We Talk About Money And Retirement

Posted Under: Financial Planning Posted On 29/01/2016

Being in our mid-forties, this stage of life keeps Scott and I busy with our family and business. However, this stage of life means we are staring at the next stage of our lives and the good life we have in store for us once the kids grow up and leave home.
Most of our generation don’t think about retirement and preparing for it until this stage of life. In fact, I was speaking with my retired mother-in-law last week about this and she said that she too did not think about retirement until her mid-forties, so this is not unique for our generation, just our stage of life.
So it’s no surprise that conversations with my 35 to 53 year old brothers, sisters and friends often turn to retirement hopes and dreams. Putting on my Financial Planner ‘hat’, here are my top 3 tips for our generation to prepare ourselves for the best retirement possible.
Tip 1 – Get Insurance if you want to sleep well at night
At this stage of our life, we usually have lots of debt from either homes, cars, toys, credit cards, business loans and investment properties. But do you think of what will happen to your family if something happens to you? For example, what if –
• You suffer an injury and you can’t work for a period of time? (Income protection insurance can cover this)
• If you have something traumatic happen to you, cancer or you have a heart attack/stroke? (Trauma, and Total and Permanent Disability Insurances cover this)
• You die? (Life Insurance covers this)
We don’t worry about these things happening because we have insurance to cover all of these possibilities. We know that if any one of these things happens to either of us, then we will have enough money to supplement our income or pay off our debts and ensure the rest of the family can live comfortably thereafter.
Tip 2 – Focus on building your retirement nest egg now
With between 15 years and 30 years till retirement depending on how old you are now, and when you want to retire it’s now time to ‘get cracking’ on building your retirement nest egg now.
Firstly, you need to work out how much you want to live on in retirement. Think of what you would want to do in retirement? Do you prefer gardening and visiting the library? Does dining out regularly appeal to you? Do you want a boat to go fishing or cruise the islands? Do you want to travel the world either backpacking or in style?
Once you have an annual figure you would like to live on, a good rule of thumb is to have 20 times that amount invested to give you that annual income. So if you think that $40,000 is what you will need, then you will need roughly $800,000 invested to earn this. The figure you come up with may seem daunting, but keep in mind that you are in your prime income earning years now, that your super will compound over the coming years and grow considerably with further contributions, and that with a savings and investment plan it is possible to achieve.
The reality is, the longer you wait to start building your nest egg, the harder it will be to achieve your retirement income and lifestyle goals.
Tip 3 – Allocate your income wisely
To find money to build your nest egg, and pay for insurance, you need to allocate your income wisely now. I’m the same as you, and I want to live comfortably now, and enjoy a beautiful life with my family, but I also am conscious of the fact that I need to prioritise earnings for the future as well.
Every dollar you earn should go exactly where you want it to go from now on, and not get frittered away by (1) activities and habits that aren’t highly satisfying anymore (perhaps unread magazine subscriptions, unused gym memberships, the 5 cups of coffee you buy daily…), or (2) paying more than you need to for insurances (health, car etc.), home loans and other debt or (3) purchasing items that you and your kids really don’t need or that don’t provide long term satisfaction.
Getting the balance right is tricky, because I’m sure you’re the same as me, you want to enjoy life now, and enjoy life later as well…..
Call me if you want a free ‘financial health check-up’ appointment to discuss where you are at financially now and how you are tracking to achieve your retirement goals.


Kim Allan