Retirement Investment Planning is Best Done Today… if not, then yesterday!
Retirement Investment Planning? Ahhh...!
Are you one of those people that say retirement is just so far away? Or are you realising right now that it is just around the corner? Don’t the years just start to scream by!
Yes time marches on for all of us and it can be your enemy or your friend financially speaking. And I will explain why and how in just a moment.
It is unfortunate though that when I ask most people, irrespective of their age, ‘have you planned for retirement’, there always seems to be justification to say not yet or not really or no!
Sure live hard, live fast, spend money and enjoy life but that doesn’t mean you get to die when you choose or when the money runs out!
For one it’s illegal and secondly as we approach the age that we were not expecting to reach or we lose our job or the money just runs out, our in-built desire to live still shines through.
Yes, living is better than the alternative but it can be pretty tough without the folding stuff!
‘It is better to be old, happy and rich than it is to be old, happy and poor!’
…and if you want to debate that then you’ve never given a cent to anyone and seen the good that it can do, so perhaps you’re better off not being rich
Realising that there is no substitute for money, perhaps our attitude should be live for today and plan for tomorrow because statistically our chances of getting to an age that we didn’t think was possible are also getting better by the day.
Over the last century life expectancy for men has increased from 55.2 years to 75.5 years and from 58.8 years to 81.3 years for women.
And by 2051, life expectancy is projected to be 82 years for men and 86.1 years for women.
You may even be lucky enough to join the number of people aged over 85 years. This group is projected to increase four-fold to 5% of the population by the year 2051!
Statistics from: ‘The Australian Bureau of Statistics, Population, Australia’s Older Population: Past, Present and Future; Population Deaths; Population Projections’
So realizing that yes, you will get old one day, really means that putting off your retirement investment planning one day longer is both costly right now and ohhh so expensive in the long run..
Retirement investment planning is best done right now today. If not today then yesterday!
Time really is money because it gives our investment the necessary ‘space’ to achieve compounding capital growth. Compounding capital growth is growth on growth of our capitally appreciating asset like property.
And it’s compounding growth on a leveraged property investment that has made and is making many of us truly wealthy.
And to be truly accurate, your retirement investment planning must address what affect that compound growth (over time) has on a property’s value and it will also highlight the cost of delay in not doing something right now.
Compound capital growth might seem a mathematical mystery, but it really is quite easy to calculate using what is called ‘The rule of 72’.
The rule of 72
The rule of 72 states that a property bought at market value today with a growth rate of 10% will double in value in 7.2 years.
How do you work with this rule?
Divide 72 by whatever the growth rate is (or growth rate that you forecast) and that will give you the years needed to double the property value. This is useful in calculating the value of your retirement needs.
We read in the ‘Why Invest’ page an example showed that the average desired income for retirement was $33,000.
To earn that you will need to have $660,000 invested achieving a 5% return
However what is the effect of inflation?
Again using the rule of 72, we can tell what effect inflation will have on this figure?
If inflation of prices is 4%, then 72 divided by 4% = 18 years for prices to double.
Conversely, this means that your buying power is halved in 18 years. The Rule of 72 tells you that $33,000 now will obviously have to double to about $66,000 to give you the same buying power in 18 years.
Hence you need an investment that is going to keep pace with inflation or you standard of living or expected lifestyle will reduce by the day.
Can you think of a better investment to include in your retirement investment planning than property?
Hopefully this rule of thumb calculator will demonstrate more than adequately and very quickly (like right now) what your real cash needs and real wealth will be when you retire.
Retirement investment planning, do it now! Your future and that of your families health wealth… and happiness depends on it.
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