How To Save Enough Money For Your Retirement

retirementIf you want to save enough money for retirement you need to start saving now but there are many options available. One of the most popular ways to save for retirement is via the self managed superannuation fund or SMSF for short. In order to make the most from this superannuation you need to understand the risks and benefits of the program. One of the primary benefits of the superannuation program is the special tax treatment it receives from the government. When a person contributes money into the SMSF the funds and profits are not taxed right away, you only pay taxes when you take the funds out but at that point in your life your income levels should have dropped due to retirement so the tax burden is greatly reduced. Since your money is tax deferred you can benefit from the power of compounding interest but you will need to plan your investment strategy carefully. Whether you are planning a party or your retirement research and due diligence is vital.

How To Invest For Your Retirement

Since your superannuation fund is self managed you decide where to invest and how much. The immediate benefit of managing your own fund is not having to pay management fees which can eat anywhere from 1-5% of the total value of your investment so if you are earning 3% per year on your investment these management fees would eat up your savings and you would essentially lose money instead of make it.

While managing your own retirement fund is cost effective you have to think about variables like inflation which will eat up the buying power of your investment funds. Inflation is when you have to spend more money to purchase the same products and services that required less money to purchase in the past. Do you remember when you were a child and you wanted to buy some snacks or go and watch a movie, how much did it cost then compared to now ? The prices today are higher not because the retailers have inflated pricing but the buying power of our money has been reduced over the years. Now that you know how inflation works you need to start looking for ways to properly invest for your retirement.

Look for investments that provide steady cash flow like rental properties, when you invest in rental properties you earn money from the rent that comes in every month but you also earn money if/when you sell the property through appreciation. As the value of the rental unit increases you stand to gain a profit when you sell the unit. This is one of the many ways you can make money investing in your self managed superannuation but you need to be proactive and begin planning now while you have time or you could end up in a situation where you simply don’t have enough time to realize your retirement savings goal.

Leave a Reply