How to save up a nest egg and reduce stress about retirement finances

Niko Iliakis

Thursday 14 November 2019

Whether retirement is aeons away or just around the corner, the question of finances never really goes away. And for many of us, the thought of not having enough money to last our golden years can be a major source of stress. 

In fact, according to a recent survey by investment firm, Franklin Templeton, a lack of savings is driving widespread anxiety among younger generations of Australians in particular.

The survey found that 70% of Australians in Generation Y experience stress or anxiety when thinking about their retirement savings and investments, and 74% of Generation X aren’t too hopeful about their retirement finances either. 

"We often hear that retired Australians or those nearing retirement are highly concerned about the adequacy of their finances to support their retirement. However, concern among younger Australians is even more widespread," said Manuel Damianakis, Head of Retail for Franklin Templeton in Australia.

73% of Gen Y and 68% of Gen X respondents expressed concern they were behind on their retirement savings, with many convinced they'll never get a chance to retire, or will have to work part-time to fund their retirement.

"When you consider that there are so many different projections about the amount of money a person will need in retirement, and estimates can differ by millions of dollars, this general malaise about retirement finance is not hard to understand," said Mr Damianakis. 

Easing that anxiety won’t be the easiest thing in the world, but it’s not impossible. Here are a few things you can do now to make sure you have a sizeable nest egg by the time you retire.

1. Make extra contributions to your super

This one is crucial. Your super fund is your main ticket to financial security late in life. By making voluntary contributions over time, you can ensure you retire with enough to live comfortably, plus reduce the amount of tax you pay along the way.

This can be done in a few ways. First, you can make a personal contribution from the income you’ve already paid tax on. But another way to go about it is salary sacrificing. That will involve chatting with your employer and arranging for some of your pre-tax income to be deposited straight into your super fund.

When you salary sacrifice into super, your contribution is taxed at 15%. If you earn $50,000, this will be on par with how much you stand to be taxed normally. But if your yearly earnings are more than $50,000, it could be significantly lower, making it a pretty shrewd money decision.

2. Create a budget

Budgeting might not be glamorous, but it’s downright essential if the goal is future financial security. That’s because tracking your expenses can help open your eyes to all the unnecessary purchases you might be making day to day. 

The goal, of course, isn’t to reduce your spending to zero - unless the idea of joining a monastery appeals to you, that would be pretty difficult - but to become more mindful about where your money is going. 

Nowadays, there are several apps that help you do just that. Many of them allow you to link your debit or credit card, meaning you won’t have to manually enter everything you buy. Budgeting apps like Pocketbook and MoneyBrilliant are just a few examples.

3. Automate your savings

If forging those kinds of habits doesn’t come easy for you, there is one way to get around the problem: automate your savings. That involves setting up an automatic transfer of funds, timed to take place each time you get paid.

If you’re the type of person that can’t help but dip into your savings, it might help to have a buffer in place. Try setting up a savings account with another bank, and have the portion of your pay you intend to save deposited there. That way it’s not as readily accessible whenever you’re tempted.

When picking a savings account, you’ll want to go with one that offers high interest rates but doesn’t come with conditions you won’t be able to meet each month. If you don’t know where to start, our savings accounts comparison page can help.

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