The most common thing I hear from clients when we’re talking about saving for retirement is “I wish I’d known that sooner”.
So here are the 5 things you need to know about building your nest egg.
- Start today.
This is my number message to anyone who will listen. Start today. If you can’t afford it today, you may not be able to afford it tomorrow, next week, next month or next year. If you put your future as a priority, you’ll be able to afford it. Even if it’s a small amount you’re investing, make it happen. Start today.
- Super should be one part of your plan – not the whole plan.
Superannuation is great and is about to become even better. From mid-2021 employer-paid contributions will steadily rise from 9.5% to reach 12% by mid-2025. The problem with super is that there is a cap on annual contributions that prevent you from building very a large balance. If you’re planning on building a considerable retirement fund, we need to discuss options other than super.
- Watch those fees!
You should be paying as much attention to your fees as you are to your returns. You’ll be paying fees regardless of whether your investment makes or loses money and high fees don’t guarantee high returns. Keep an eye on those fees.
- What returns are you expecting?
A study of global investors found that investors have overly high expectations for investment returns. 27% of Australians expect to earn 10-14% each year on their investments, and that’s just not realistic over the long term. A more realistic return from ‘balanced’ super funds is 7.3%* annually over the last 27 years since the Super Guarantee was introduced. (*figure from SuperRatings)
Remember that some years you’ll see big gains and others will see losses. By taking a long term view, the highs and lows will average out so somewhere around 7%.
- Emotions shouldn’t be driving your investment decisions.
Setting long term investment goals, knowing what you’re aiming for and focussing on building a diversified portfolio of investments will help remove emotion from your investment decisions.
70% of Aussies admit that their emotions drive their investment decisions and this can lead to knee jerk reactions based on short term movements of the share market.
Keep your focus on your goals rather than the daily performance of whatever is overachieving or underachieving on that day.
What will you be doing today that will make a difference to your tomorrow?