Financial planning tips to save $1 Million for your Retirement
August 2, 2023
The R-word – Retirement. It is a time that many of us look forward to escaping the 9 to 5 grind and starting to fill our days with relaxation, travel, and pursuing hobbies.
The big question is, how much will we need to comfortably retire? Obviously, that amount varies for each of us and what is comfortable for me, might not work for you.
If we take the sum of $1 million, how can you accumulate that much wealth for your retirement? Here are some practical tips to help you reach your goal.
Start Early and Stay Consistent
Time is your greatest asset when it comes to saving for retirement. The earlier you start, the more time your money has to grow through compound interest. It is likely not something you really want to think about when you are in your 20s or 30s but getting into the habit of saving by setting aside a fixed percentage of your income each month will help to set you up later in life.
Create a Realistic Budget
Creating a comprehensive budget that aligns your spending with your retirement goals. It should be realistic and you also need to enjoy life right now so balance is important.
Take a look at your expenses and identify if that are areas where you can cut back without sacrificing your quality of life.
If you prioritize saving and make it a non-negotiable expense in your budget then it is less likely to be allocated to something else (like that new car or expensive handbag)
Maximize Employer Contributions
New laws came into effect as of July 2023 to increase the employer contribution made to employees. Take full advantage of any retirement plans offered by your employer and also consider salary sacrifice to further maximise your taxable income to work for you.
Contribute enough to receive the maximum employer match, as it’s essentially free money.
To further leverage this, you can increase your contributions annually as you receive salary raises.
Diversify Your Investments
Don’t put all your eggs in one basket. Diversify your retirement portfolio by investing in a mix of property, shares, managed funds, and other assets based on your risk tolerance and retirement timeline. A financial advisor will help you create a well-balanced investment strategy.
Cut Down on Unnecessary Expenses
Identify unnecessary expenses that can be eliminated or reduced. Evaluate your subscriptions, dining-out habits, and other discretionary spending to free up more money for retirement savings. That daily fancy coffee can quickly add up to thousands of dollars saved and could be much more wisely used elsewhere. Small sacrifices now can have a significant impact on your retirement nest egg.
Prioritize paying off high-interest debts, such as credit card balances or personal loans. The interest you save by eliminating debt can be redirected toward your retirement savings. These days credit cards are highly accessible and we are encouraged to use them everywhere but if you can, try to avoid accumulating new debt and strive to live within your means. Heck, move back to using cash.
You can be prepared for your future you and whilst $1 million might seem like a massive amount, by starting early and saving wisely the compound impact adds up over time. Start with a plan, revise it as you get older and earn more and do regular revenues of your expenses and investments.
By implementing these tips and staying committed to your retirement plan, you can create a solid financial foundation for your golden years.
This does not constitute advice and is general in nature only. For a personalised retirement plan please seek advice from your financial planning specialist.
Note: this article contains general advice only & you should seek further information from your personal Rivers Insurance Broker about the impact of any information provided here on your personal or business needs. ABN: 28 010 242 681 AFS License: 247093 www.riversinsurance.com.au