Australia the land of Broke Retirees

Retirement and  why property may help 

Research shows that only one in 10 Australians currently invest in residential property as a vehicle for wealth creation. With statistics showing that less than 10% of Australians are retiring in a similar or better financial position than before retirement. Do we need to ask the Question ? Is property the best investment vehicle to achieve a self-funded retirement? And if so, what is stopping the other 90% from investing in Australian property.?

Broke at 40 - Wait until your income drops by 60%

According to the Commonwealth Bank on their website when it comes to wealth creation for Australians’ residential property remains the number one asset, accounting for $4.4 trillion of our wealth”.

In comparison to other asset classes the bank states that superannuation accounts for $1.5 trillion, Australian listed stocks $1.3 trillion and commercial real estate $0.7 trillion.

Based on the above there are strong indicators that Australians feel safe in bricks and mortar. After conducting research there were three repeating reasons that appeared when questioned non investors on what was stopping them.
1) A Fear of Investing - this could be as simple as not wanting to lose money or a deep seated fear or phobia.
2) Don't know how to do it or where to start - some people are financially inept and for whatever reason can't put a plan in place to make it happen.
3) Could not be bothered with the headache - Unfortunately this is where most Australian's are placed. Most people do not see the URGENT need to create wealth at this very moment.

Unfortunately it seems the majority also underestimate the amount they will require to fund their retirement and overestimate how much their Superannuation will provide.

Data provided by the Australian Bureau of Statistics from their Census results indicate these people are in for a rude shock. Unless they make fundamental changes to their financial structures chances are without a lottery win or recieving a substantial inheritance they will end up either Dead, Dead Broke or Still Working though their twilight years.

Not much reward for a life time of sweat and toil !

If you grew up in Australia with Baby Boomers as parents, keeping in mind they were raised by parents who lived through a depression, you were most likely told that debt is bad and should be avoided at all costs.. The safest way to secure your future was to save a large deposit then buy a home. Once you had a family you would work as hard as you can to pay your mortgage off and when you retire you will always have a roof over your head and a back yard to grow vegetables.

Now fast forward to 2013 and according to the Melbourne Institute you will need at least $38,000 per year as a household just to live above the poverty line in retirement. The website then advises that as of March 2013 the maximum age pension a couple can receive in Australia is $31,688.
Realistically, a comfortable lifestyle Retirement goal in 2014 should provide at least $60,000 p/a for a couple.

To achieve this you would require approximately $1.200,000 invested in an income producing asset, this figure should not including the value or equity in the family home.

This scenario would provide an annual income of around $60,000 p/a with a 5% return.
As you can imagine saving your way to Retirement seems a futile exercise. This is where you need to take advantage of leveraging and using debt to your advantage. There have been very few wealthy people who have saved their way to wealth. You need to use debt to leverage your exposure and therefore multiply your returns.

Also as important is the need to protect and preserve your most important asset - your family home. There is clear anecdotal evidence that more and more Australians are relying on using the equity in their home to help fund retirement. They are effectively reducing the amount available for future generations

To highlight the problem, the investment management firm Challenger provide data from APRA that show that the average superannuation fund for couple aged 60 plus is currently between $120,000 - $200, 000. These figures are a far cry from the amount required and you don't need to be a mathematician to work out there is very little that could be done to fix the problem. In reality,these people are heading for a meager existence unless they remain employable.

Missing the mark with your finances - your not alone

So back to Property & how to avoid the above scenario? It really comes down the old adage "Just Do Something".

The longer you leave it the harder it is going to be - Already the Federal Government has began making changes to reduce the Age Pension entitlements and reduce Social Service payments.
The Government can see the writing on the wall and need to take decisive action and implement policies and tax incentives to encourage mum and dad investors. If we want Australia to remain the Lucky Country then who is going to pay for increasing costs' associated with a large increasing number of an aging population?.

Another key difference in our modern society is the increasing expense involved to provide essential services and we live in a much more disposable society, 'things aren't made like they used to be"
this makes for interesting times for the Generation X crowd who will be heading in to their last quarter of their working lives very soon.

So what can you do?

First - Make an appointment to see a good Advisor who understands and works with Direct Property,Property Funds, Superannuation, Tax Planning & Debt Reduction is a good place to start.
Just like your Doctor, don't worry they've heard it and seen it all before. so don't feel embarrassed about your current situation. no matter how Grim the future may look.
OK, you've found your Adviser - Now what?

The 6 Important Questions to ask

1) How can I reduce my debt in the shortest time frame by utilising cash flow management?

2) How can I save paying so much tax & how can I use this improve my cash flow & reduce debt?.

3) How much am I risking in equity or cash and how long is this risk expected to last?

4) What will your strategy achieve for me in xyz years?

5) What will happen if this or that happens?

6) What are the risks associated with my family home?

If your Adviser cannot answer these 6 Basics questions then find another. Other professionals that can assist are your Accountant, Your Mortgage Broker or your Asset Managers & Strategists.

Good luck and we would love to hear your experiences and comments.
Remember - Sharing is Caring

We truly believe property is the best vehicle for the average Australian to create wealth

Author - Antonio Sawlwin - Santolo
Contact -
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