Closeup of businessman and woman discussing on stockmarket document in office

Question: Is simply saving money good enough for retirement?

Answer: Not as good as you may think…

Challenger’s chairman of retirement income, Jeremy Cooper, suggested that if a $1Million nest egg was used to buy a lifetime of income using current interest rates, you would roughly make $648.50 a week, which isn’t that much different from a government pension. So if you are thinking that having half a million or even a million dollars in superannuation will be enough to make you comfortable in retirement, better think again.

Changing our perspective on money

When we think of money, we think of something that’s tangible. For instance, most people think like this: ‘if I have X amount of dollars, I can do this, this and this’. The greater ‘X’ is, the more you think you can do.

For some reason, most people think that $1 Million is a lot to be able to do all the things you want. Unfortunately, that is just a tired old perception on money.

Don’t get me wrong. $1 Million is a lot of cash on its own. However, it isn’t ‘a lot’ in terms of lasting you your retirement (assuming you’re relying solely on it for daily living).

The truth is that money is really just a concept. It is a way of measuring value (of a product or service). When we hand out cash, we are handing out notes that represent a certain value. This value isn’t set in stone. It is affected based on economic trends. In other words, what you think is a lot now may not be in 15, 20 or 30 years time.

This is the problem we have with inflation. We may open up a savings account for retirement now, which guarantees X amount of dollars when we retire. The estimates you see today look good. But as the years roll by and cost of living increases, the less valuable that savings account feels.

Wealth creation is more than just being prudent with your spending and developing a habit of saving money. Relying solely on savings is a risky proposition if you want to be comfortable in retirement because it is hard to outrun inflation by just saving a portion of your income time and time again. This is the reason why you need a wealth creation strategy.

Building A Wealth Creation Strategy For Your Retirement

It is funny (or should I say tragic) that schools don’t really teach about personal finance. By the time we graduate, most people have no idea on how to build a wealth creation strategy for their retirement. We develop an employment mindset and hope that we’ll be able to save enough when we choose to retire.

Very few are equipped with the knowledge to prepare for the future after graduation, so much that young people have become skeptical of whether they will ever be able to afford their own home.

Building a sufficient wealth creation strategy is an important skill and it is something people must be willing to learn and apply for themselves. Otherwise, life will be a constant struggle at the hands of inflation.

If you are interested in learning more about wealth creation strategies through property investment, register for our ‘Prepare Your Wealthy Future’ seminar at www.pwf.com.au/masterclass/