Unfortunately, this isn’t always possible. The high cost of housing means that more Australians have had to take on large debt and may retire without having paid off their mortgages.
If you’re nearing your twilight years and think you might be heading in this direction, there are a number of strategies you can adopt now to get out of debt in time for retirement.
To start, take stock of any personal debt you have
This may include your mortgage, car loan or credit card debt. Factor in any interest and or fees you are paying on those debts so you know exactly what your financial situation is.
Pay down your high-interest rate debts first
If you have any credit card debt for example, it’s a good idea to try to pay this debt down as soon as possible as it’s costing you the most in interest repayments.
Get a home loan health check
Don’t be complacent with your home loan and ensure you’re in the right product for your needs by getting a home loan health check. It’s possible that you’re missing out on a more competitive interest rate and/or home loan features.
Make extra repayments
Try to make extra home loan repayments where possible. If you receive any extra income, put it towards your home loan as the faster you pay down your mortgage, the less interest you’ll pay over the long term. You may also want to consider making the most of home loan features such as an offset account attached to your home loan, which reduces the amount of interest you pay on your loan overtime. Of course, not all loans have an offset feature so it’s best to speak to your local Mortgage Choice broker to ensure this is an appropriate strategy for you.
Consolidate your super
Your superannuation is the nest egg for your retirement but if it is scattered across multiple funds you’re likely to be paying more than one set of fees which can eat away at your retirement income. Before consolidating multiple super accounts into one, do your research and look out for termination or exit fees, ensure the new fund aligns with your appetite for risk and offers insurance options that matter to you (death and disability insurance and income protection etc.). As is the case with any investment- your super should be chosen with care and this is even more important as you near your retirement years.
Make voluntary super contributions to boost your nest egg. If you look at your superannuation as a forced savings account, it’s not a bad idea to make extra contributions where possible as you’ll not be able to dip into it for discretionary spending.
You may want to consider investing your savings in order to grow your wealth for retirement. Your investment strategy will vary depending on your proximity to retirement and appetite for risk. Generally speaking, the closer you are to leaving the workforce, the less risk you should take when approaching investments.
Chances are as you near retirement you will require less living space as your children move out of the family home. Downsizing into a smaller and less expensive home could free up a decent amount of cash, which you can put towards paying off your mortgage or invest in your superannuation.
Seek professional advice
While there’s a wealth of information online, it’s important to remember that most financial service providers will typically offer ‘general advice’, which does not cater to your specific financial objectives and situation.