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Retirement shortfalls

Did you know 95% of Australians will have less than half the recommended savings for retirement

Funding the retirement period

The good news is that people are living longer, people often live to around 88 years old now, if we retire at 67 years old our super needs to last us 21 years. $400,000 sounds like a lot of money, however, over 20 years it only works out at a meagre $20,00 a year or $384 a week.

This is poverty, chances are their savings will be spent within 6 to 8 years, what then. Well based on what the Government forecasts many Australians will need to either go back to work or will end up homeless. With 95% of Australians likely to be in this situation one could certainly surmise that the current strategies have failed most Australians. This does not even factor in that through inflation our buying power is reducing by about 2% each year.

The Governments answer to this is getting people to increase their contributions to 12%, arguably a few percentage points can make a big difference in the longer term., but will it really address the shortfall?

Why going the normal superannuation route may not be in your best interest

Superannuation is becoming a major issue in Australia, the Government has known for decades with the number of baby boomers going into retirement would require unsustainable funding. In an attempt to get Australians to start saving and investing money for retirement the national superannuation program was created.

The idea of saving a portion of your earnings and invested it sounds like a good idea providing the recommended methods can actually reach the retirement targets. Herein lies the issue, based on the figures, 95% of Australians will only retire with $400,000 or less, with a large portion far less than even that.

Why everyday investing can be the real cause of the problem

Most Australians have little to no idea how their money is actually invested, what they pay in fees or even how much risk they are actually taking.  Most Australians would likely be very shocked to know that around 50 to 65% of their retirement savings are invested in the stock market. 

When we say the stock market we are talking about Index shares, meaning the top of the index. For example, if you took the top 20 biggest companies in Australia a large portion of your money will likely be invested there. Larger companies tend to be more stable, however, they can still fail or have large losses. Most importantly if you’re investing in a company that already has market-share its less likely to have the type of growth that will make you wealthy. For example, if you are invested in Woolworths they are likely to have minimal growth as they struggle to gain any more market share being that Woolworths and Coles already share market dominance.

To make a good return on your investment, that investment needs to increase in value, putting most of your money into index funds is most likely just going to get a very basic return.

The third part is that over the long term the stock market is prone to crashes every 10 to 12 years. It does not matter how great your gains are if a large percentage of your savings gets wiped out every decade. Also, with the recent royal commission, we learned a lot about many of the unscrupulous fees and charges by many of the leading superfund’s. 

Most people are not aware that most Superfund’s do not even invest your money, they give your money out to investment managers, this means paying fees and a percentage of your profit to multiple entities. 

More attractive options with greater potential

If you want to retire comfortably evidence would suggest you need to choose better than the cooker cutter solutions the vast majority has chosen. Ask your self this question and the answer will become blindingly clear that you can do better. The question you ask?

How many wealthy people leave their money invested in a standard retail or industry fund?

I think we all know the answer to that would be next to none.

So the next question is where do wealthy people invest their money, well this is where we come in. We live to educate people on those far more attractive options wealthy people tend to invest in.

SMSF’s are extremely popular now with one-third of Australians now using one to invest their super. Other popular options are wholesale or professionally managed funds. These more attractive options are often more adaptive, they cut out the middleman or invest in appreciating asset classes rather than the volatile stock market.

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