The changes to superannuation contributions have caused a bit of a stir amongst Baby Boomers who realise they need to do something quite substantial now to ensure they have sufficient wealth to support their lifestyle in retirement. This segment of the population enjoys buying toys and having great holidays on a regular basis. After having done all sorts of calculations for a number of our clients who have made enquiries regarding additional superannuation contributions, it has become very obvious that this is not the best approach for most people.
The biggest negatives against putting money into superannuation are:
1. You cannot access the funds if you choose to take an early retirement
2. You are not able to leverage off these funds.
As I'm sure you have heard, the secret to creating a substantial amount of wealth is LEVERAGE – using someone else’s money to create more for you. In my experience over the past 10 years as a Financial Adviser, I've seen too many recommendations made to clients from a tax minimisation perspective rather than from a wealth creation perspective. Many clients purchase investments that are hurting them because they were advised to buy in order to minimize their taxes. Ultimately any investment strategy should be to increase your wealth - after all, isn't that why you are investing in the first place? Tax minimisation should only be a secondary motivation.
In my opinion property is still, and probably always will be, the safest place to invest your money. It would also have to be one of the most tax effective investments in Australia. Many of my clients are paying less than 15% tax on their entire income, while increasing their wealth.
Property is definitely the tool that provides the most leveragability as in many cases you can borrow 100% of the purchase price plus all the costs depending on your financial circumstances. Our personal strategy for retirement was to acquire a number of properties over a period of time, pay off as much of the debt as possible and then retire off the capital growth.
Many people still believe they would need to sell the property to access their wealth in retirement, which is absolutely not the case. If you structure your finances correctly and acquire properties that suit your financial profile and then give them time to grow, you will be able to take an early retirement and draw a tax free income each year from your property portfolio for the rest of your life.
So when this sounds so exciting, what stops people from taking this approach? Very simply it's fear, which comes from a lack of understanding. Once people understand how to structure their finances correctly and acquire properties that suit their financial profile, they do it as long as they have the courage to make a decision.
Besides fear, the next biggest hurdle is complacency – a disease that is crippling Australians and will have at least half the population living in extreme poverty in retirement.
So I hope I have jolted you enough to have a look at your finances, especially if you are a baby boomer. You may find your options for your future limited if your sole wealth creation strategy is to make additional contributions to superannuation. Instead, why not look at property investment as a strategy and get some real estate investing information - you might be pleasantly surprised at how a simple restructure of your finances could result in a far more significant wealth for yourself, perhaps even now and then for your future.
If you liked this article or have any questions, please leave me a comment below. I'd love to hear what you thought and also what your strategies for wealth creation are. Also, please share this article on Twitter, Digg, Delicious and Stumbleupon - I'd really appreciate it :-)
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