Financial Mappers Free is coming soon. It will be provided so everyone can make a short Financial Plan. One the key features is the ability to allocate your savings to various types of investments, including the paying down of debt as displayed on the Planner Page.
In this 5-Year Plan, 10% of the savings are allocated to Pre-Tax Superannuation Contributions (purple) and a High Growth Managed Fund (orange). The remaining 80% is transferred to the Transaction Account (blue). In Year 4, an Investment Property is purchased, and the loan costs (Red) are deducted from the Transaction Account.
How will Superannuation impact on your savings?
With 12% of your salary being paid to your Superannuation, from July 2025, pressure is being taken from the importance of personal savings. However, Superannuation alone is unlikely to provide most with sufficient funds to cater for their retirement lifestyle.
According to Rest Superannuation, these are the guidelines of how much you should have in Superannuation for the following ages.
Home Ownership
Some people fail to realise that their home is an investment. While there is usually no income, except where the owner rents part of the home, the home can be downsized in later life and the additional funds invested to provide more income in retirement. It is also a valuable source of equity for future investments that require a loan.
As you consider home ownership, you should create a way to manage this investment. These are some questions to ask yourself, with there being no “right” answer, but rather what suits your personality and priorities.
- Am I better to allocate all my savings from investments to saving for a home deposit and then repaying the home loan before I start investing? Interest on the home loan is not tax deductible. By paying off the home first, you can have equity that will allow you to borrow more, using tax deductible interest when you start to invest.
- Am I better to repay my home loan and save for investments in parallel. This strategy may have advantages for those who want to use the compounding effect of holding investments for longer. You may decide it is best to have a nest-egg started that can be used as your Emergency Fund if required.
- Am I better to rent and allocate all my savings to investments, including real estate. If you live in cities such as Sydney where real estate prices are beyond the means of the average person, there could be an advantage to rent close to your workplace, saving on the cost of travel and invest in real estate that is in a less expensive area. It may be somewhere you would like to retire or an area with higher capital growth potential.
Did you know that a 2016 study by the Centre of Excellence in Population Age Research found that that 36% of homeowners had a mortgage at retirement. This is up from 23% in 2006 and is expected to keep rising.
Retiring with a home mortgage will absorb valuable retirement income. If you choose to use your Superannuation to pay down your mortgage will again reduce your retirement income.
How much should I save?
This question can’t be answered before you decide how much retirement income you require.
According to the Association of Superannuation Funds (ASFA), a single person needs around $595,000 and couples need $690,000 in retirement savings. This is based on an annual income of $51,805 for singles and $73,077 for couples. This income is considered a comfortable lifestyle. However, this may not be sufficient if you want to participate in expensive hobbies, travel or help support children. Did you know that about 30% of grandparents help with paying school fees or other educational expenses.
The percentage of savings for investments can vary over different stages of your life. Using Financial Mappers you can map out a strategy that will enable you to reach your financial targets in a timely manner.
When it comes to savings a common rule of thumb is the 50/30/20 Rule. 50% is allocated to essential needs, 30% to wants and 20% to savings. I believe you could include your Employee Superannuation Contributions as part of your savings.
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To find out more, please watch this 2 minute video explaining the elements of Allocating your Savings to Investments.
Glenis Phillips SF Fin – Designer of Financial Mappers and Advice Online
Disclaimer: Financial Mappers does not have an Australian Services License, does not offer financial planning advice, and does not recommend financial products.
