This week we have a great question from the community about property and retirement.
I am a single mum of three, with my youngest son in his final year at school. I have a small mortgage on an old house close to the city but I am never sure what the best options are to head towards retirement. I realise I will never receive a pension due to my healthy super balance so I recently went to a seminar on property investment, and it all made sense to me. However, I’m wondering if it’s too good to be true! Fear holds me back from committing to anything as I’m afraid that if I don’t get it right it could all go pear shaped! Thoughts?
Congratulations first of all, on your healthy super balance. That’s no small achievement so great job! I also want to commend you on your caution. As a single parent of course the metaphorical buck stops with you, so your caution is justified.
Your email has inspired me to write a piece dedicated to tips and traps around investment seminars (so watch out for that in coming weeks) but for now I will say that property investment seminars can be two things:
a) A great source of information, but also sometimes…
b) An example of ‘if it’s too good to be true it probably is’
It all depends on who is running the seminar.
If it is a pitch for buying in a particular development I would flex that caution muscle of yours again (I would be especially careful if they are rolling out the red carpet for you or giving you a deadline to get in).
However, if it is an experienced buyers’ agent who acts on behalf of investors (i.e. they are paid by you and not by a developer) then there could be some merit to it. Even so, I still wouldn’t be jumping in without doing my research and having a clear strategy. Keep in mind that some of those investments can be aggressive and risky in order to achieve the “wow” factor that you’re being sold on.
In terms of your retirement, I’d start with figuring out how much you think you will need for retirement. MoneySmart has a good retirement planner you can play with. Then work backwards from there to align what you want in the future to what you can do here and now.
As always, I would always first make sure you have the basics down before looking at investing, like making sure you have an emergency fund, sorting out your insurances and setting some realistic goals.
Then there are many strategies that you could consider to ensure you have enough money in retirement, both inside and outside of property investing, inside and outside super depending on your timeframes. For example, salary sacrificing a bit extra into super can help reduce your tax bill and boost your balance today and therefore your returns in the future, or even paying extra on your mortgage so you’re debt free means that you won’t have to worry about a roof over your head in retirement and can afford to take more risks when investing.
Whatever you choose to do, keep in mind my 5 golden rules for investing:
- Always do your research
- Don’t be afraid to ask questions
- If you don’t understand it – don’t do it!
- Never risk money you can’t afford to lose
- Always diversify to help you manage your risks
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