iAdvice Financial Services | Building Wealth for Early Retirement
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Building Wealth for Early Retirement

Building Wealth for Early Retirement

Believe it or not, building wealth for a secure, early retirement is actually very simple. The equation for financial success is a function of just three easy-to-understand principles:

  1. The amount of money you invest.
  2. The growth rate of your money.
  3. The amount of time it has to grow.

Unfortunately, few people succeed in building wealth because it has little to do with understanding simple principles and everything to do with taking effective action. The challenge isn’t in knowledge, but in translating that knowledge into meaningful results.

You might be surprised to learn that Aussies are retiring earlier, with 25% of men retiring before age 55 and 50% retiring between 55 to 64 years. For women, the figures are higher, with 55% stopping work before they reach 55 and 36% retiring between the ages of 55 and 64 years.

But while these figures sound encouraging, one in three people between the ages of 18 to 64 years still think retirement is too far way to plan for. So if your goal is to retire early, how can you put in place a plan and make sure you’ll have enough money to live on?

Early retirement planning is identical to conventional retirement planning with one big exception – time. You have less time to achieve your financial goals, and more time that your money must last after retiring. What this means is you have a shortened, accelerated financial preparation phase, and an extended, post-retirement spending phase when you retire early. Changing the time-frame will also change many other aspects of retirement planning – but not everything. It’s important to understand the differences.

Building wealth to take an early retirement requires you overcome the following two hurdles:

  1. You must translate the wealth building principles into actionable rules that will take you to your goal.
  2. Then, you must actually live according to those rules.


This is critical. Most people fail to succeed financially because the rules are easy to understand but surprisingly hard to live by. Living them is the key and today we have some tips on that.

Find ways to grow your retirement income

Ask any retiree what they fear the most and chances are most will say ‘running out of money’. But there are ways to stretch your retirement income and things you can do to make your money last as long as possible.

Plan Ahead

Have a clear view towards your objective and project a retirement age accordingly.

Financial Roadmap

Have a financial roadmap. It’s a good idea to map out things like your financial goals, major payments, health care needs and any government benefits you’ll be able to receive at different stages in your life.

Manage your spending

A simple way to make your money last longer is to watch your spending. Use our budget planner to help you save for special items and keep your expenses in check. Do you want to splurge straight after retirement then spend 20 years living on bread and water? Definitely not!

Invest, don’t just save

To some, the words ‘invest’ and ‘save’ are synonymous. They’re mistaken. Saving involves safe, boring risk-free bank and building society accounts, where your capital is protected. Investing in shares puts that capital at risk — but offers a potentially higher rate of return in the long run even if it was stuck in a low-cost index tracking fund.

Diversify your investments

With an expected life up to 84 and beyond, it’s a good idea to invest at least some of your money in assets that will grow over time, like shares and property. This will help ensure your capital will grow in value to keep pace with inflation and your income needs. Spread your investments to avoid financial heartache in the future.

Manage your debt

The number of people over the age of 65 who are still paying off a mortgage has increased by 54% in recent years. So consider refinancing or consolidating your debts sooner rather than later to reduce interest, fees and charges. It’s no using trying to save for an early retirement if you still have debt hanging over your head. Find out more about how to pay off your debt.

Keep debt to minimum

Keeping your debt to a minimum throughout your life means that there will be less to pay off come retirement. Credit cards are a tempting way to spend more money, and are easily available through banks. However, they also have high interest rates which can all add up on to how much you’re paying back in order to wipe the debt.

Instead of taking out credit cards or personal loans, stay on top of your finances by saving first. For instance, instead of purchasing a car with dealership provided finance, you could opt to save up money for it yourself over a period of time.

Salary sacrifice to super

The more you can put into your super, the sooner you may be able to retire. By salary sacrificing some of your before-tax income and putting it into your super, you’ll generally only be taxed at 15%, which is lower than most people’s income tax rate. Contract our financial adviser to find out how much this could make a difference.

Make your after-tax income count

If you make personal after-tax contributions to your super, you could be eligible for a government co-contribution of up to $500 per year or your spouse could receive a tax offset by contributing to your super on your behalf.

Get advice as early as you can

Managing your finances can be hard work even if you have some financial knowledge. Ask for financial advice if you need help with investment strategies and to navigate our complex tax system. Ask our adviser to explain different investment strategies, the level of risk involved and the potential returns you can expect.

If you are wondering where to get financial advice, we can help. Why not get in touch by calling (03) 8658-8875.

Remember, the unique twist to early retirement is all about time – less time to build wealth, and more time to enjoy it. The earlier that you begin planning how you are going to fund your retirement income; the better off you’ll be in the future. And you won’t regret your decision once you reach your preservation age! Leaving planning until the last minute means that you may not be able to live a comfortable lifestyle once you retire, so starting out early will help you provide you with peace of mind.

So what can you do at this stage? Get in touch with our financial planner today!

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