Just wondering where we would all like to be at the age of 60 financially?
How much are you hoping to have in terms of assets etc?
Thanks
PS I am planning to retire in the next 10 years hence the post.
Just How Much Is Enough to Have?
grabngo on 14/06/2017 - 10:48
Comments
What, no meme collection?
You want to be crafting fresh memes well into your twilight years.
no SSD drives?
Depends what you want to do.
If you own your house and qualify for the age pension you could live a lavish lifestyle in SE Asia for the rest of your days with literally zero other savings.
If you are house-less and renting in Sydney you will be in dire straits.
My personal intention is to pay off my house and look to provide an ongoing income, linked to inflation (so share dividends or property rent income) adequate to provide a modest income in Australia, and do some travelling.
If for you that is, say, $40,000p.a., then you likely need around $800k in assets if you don't want to run down the capital (as insurance against living beyond 80) and you have no access to the age pension. Half that if you do, ballpark.
Remember you will likely pay no income tax on your post retirement income, and likely get some or all of the age pension, when crunching the numbers.If I'm living in SEA what do I need a house in Australia for? rental income? If it's not my PPoR wouldn't it count for the assets test?
I think @mskeggs means that if you own your house now and sell it when you retire, then you'll have plenty of money to live off the money from the sale.
Sorry, I wasn't giving financial planning advice, just pointing out a pretty modest collection of assets (a paid off home and qualification for the pension by working over 35 years) could provide for a good retirement in a low expense area, while a person with a similar history but rented instead of buying would be in tough times in a costly place like Sydney.
Illustrating how subjective any answer would be.
Obviously it depends on your planned lifestyle. There are calculators on super sites which allow you to put in estimated costs and then calculate how long your savings will last you.
currently,my house is paid of.
I am quite happy with that.I do have some good debts.
Got a decent job but cant see myself working till 65 etc
Want to take it easy a bit .You can currently access your super at age 55 ( I think, it is called preservation age and varies by date of birth).
If you wanted to quit work as early as possible, and are content with the age pension, retire at 55 and spend your super balance to support you until you are 65 and get the pension.
Note you could get some part time or occasional work to supplement your income a bit, and you would have a pretty good tax position, so you would keep pretty much any low income.
I would get debt free before I did something like this, though.Preservation age is on the rise. Currently age 57 but will be age 60 for OP.
A property that's mortgage free and 500k invested to live on the interest/dividends.
Other than that, one or the other and bug-out to a country with cheaper living costs.
All depends on what you want out of life.
1 house paid off in Sydney, independent kids, then rent out said 1 house and hit the road (camping/touring etc) at whatever age this is achieved
This is our retirement plan. Would love to travel around Australia before I go.
Do it. As soon as possible. Clock is ticking !!
I wish we could. Son is only 5 years old unfortunately. Can't cook yet.
where I can look at something to purchase without wondering whether I can afford to or where the money comes from…
take the wife out to a nice dinner without worrying is the electricity or rates
obviously not talking about a house or car… but if I was going to the shops and saw a nice sweater it should be able to purchase it without to much worrying whether I can afford to or have to sacrifice certain things to get it. being financially independent and secure like this at any stage of your life would be desirable.
I've just bought an $80k car. I believe this to be a high yield investment that will see me living comfortably in retirement.
we've cycled that enough, don't ya recon?
Nope
how about a diamond ring as an investment?
Don't be crazy, Diamonds will depreciate like water. Cars, Computers and children are the true high yielding investments
but my motherinlaw thinks its the best investment instrument.
Motherinlaws know better, just ask them
It depends on the income you want in retirement and the return you can earn on your assets - from there you can work out how much assets you need.
Assuming you don't need the pension, do you want the average weekly income, more or less? Most people would need less because they don't have a mortgage to pay off or superannuation to contribute to or work related expenses.
Say you need $100k p.a. If you can invest this amount at 10% p.a. (assuming no tax/transaction costs), then you'll need $1m in assets if you never draw down the capital. It's calculated as $100k/0.1. The assets will last forever. But you won't live forever, so if you want to draw down the amount over say 30 years, and you earn the same return, you'll need less than $1m. The calculation is only a bit more complex - it's like a principal and interest loan where you're the bank receiving the fixed payments over 30 years.
You also have to consider inflation - so ideally this income needs to be invested in growth assets so the income from it will grow to at least cover inflation. The calculations above can be adjusted for inflation by letting the income grow at say 3% p.a. (proxy for inflation).
Your dwelling is an important consideration. If you don't have one, then your income needs to increase by your expected rental cost. On the other hand, in suburbs in Sydney's North Shore, retirees are selling properties for $2+ to $3+m. They can use some of this money to buy say a townhouse or apartment, in a cheaper suburb, and live off the balance, without needing any other assets, assuming they've already paid down the mortgage.
If you need the pension or part of it, then the calculation is a bit more complex and you might need advice on how to optimise your situation.
Lastly, how confident are you in managing a sum of money or a portfolio of investments? For example, someone I know wanted to retire early by a couple of years and sell their apartment and buy a cheaper one to have a lump sum so they don't have to always have think about each spend they make. With this attitude, the lump sum probably won't last very long.
Assuming you don't need the pension
At $31683.60 p.a. for a couple, it seems much more than a rounding error.
Say you need $100k p.a.
A very high figure. The median household income (so fully half earn lower) was under $81k. And the bulk of those households would be spending on housing and have adverse tax positions. So you would have dramatically more available as spending money than an average household.
I don't fault your approach, except the idea of disregarding the pension, but I take issue with the ongoing promotion of the necessity of high incomes in retirement that is lazily tossed around by the super industry and financial planners. But even their "comfortable" lifestyle which includes periodic purchasing of new cars and overseas holidays is only $60k p.a. per couple.
OP wants to take it easy, not work until they are 75 so they can amass a nest egg that will give them a few years of extravagance until death. I hope the folk who tuck away millions for retirement are still hitting the slopes in Colorado and hiking K2 at 85 years old, but surely common sense says you can spend a bit more while you are younger because your last years won't be in a position to spend big on lifestyle.
I think they just used 100k as an example because it's easy to do the maths on it. Not because they think you need 100k to live off. Like when people explain GST to kids by saying 'imagine I have this pair of pants that costs $100…'
Correct, so if you need just $50k, halve the amount.
I agree with you and that's why I said most people need less in retirement. It should be all but there are silly people…
I used $100k for ease of calculation, if you need $50k, halve the amount. Average weekly income is somewhere between $50k and $100k but it's easier to work with nice round figures.
I left the bit about the pension for the 2nd last point. E.g. if the pension provides half of your income needs, you need half the assets, but you might need specialist advice to maximise your pension.
We are in our early 30s this year. Intend to live in South East Asia for 6 months a year when we retire as my family is there. Goal is one house fully paid off in Aus and one in SEA, debt free and approx $2m in a variety of investments. 30 more years to go before i retire.
Right now we are extremely thrifty and well ahead of our targets with a house almost paid off. We also try to limit things like car purchases to 2-3% of our household networth.
We are also incredibly lucky to have purchased our house before all the madness in the last few years. Since then, it has almost doubled in value.
But why not $1m in investments and retire 15 years earlier? Is that extra time working for money that won't be needed time well spent?
I would much rather retire in my late 40s with my health still 100% and decades of high quality of life, as opposed to 60s with declining energy but a bit of extra cash.So what do you do to fill in your time in your 40's if you don't have lot of cash? Hubby and I have pondered this for a while now and there is only so much lolling about you can do.
I don't know how to answer this except to say nearly everything i do for pleasure or recreation is pretty low cost. I'm in my 40s.
Things I would do if I had more time, and importantly, complete control over my time include:
- more time teaching my daughter to drive
- go to the beach more
- take the kayak out more
- bushwalking
- more time on the volunteer group board I am a part of.
- read more of the hundreds of books still waiting for me
- watch some of the movies and TV I still want to watch
- play some of the huge backlog of games that have come out since I last had plenty of time to play games in the early 1990s
- play more guitar
- bake more
- grow more of my own food (this one kills me at the moment as a week when I am smashed at work sees me watering at 10:30 at night, not my preference)
- road trips to visit family
- more camping
- write a book
- learn more Italian (and a few extra languages after that).
- build some more LEGO with my youngest
- volunteer to do IT help at the Men's shed
- paint the house and general DIY
- landscape the front garden
- do more at the P&C
- write a blog
- finish restoring an armchair
- finish an electronics course I am part way through
- learn more about cars and fixing them
- brew better beer
- visit my Mum & Dad more
- go to the Art Gallery
- improve my photography, and post process some of my backlog
- learn to sew with a machine
- learn new web coding stuff
- join a political party and be involvedThats a few minutes thought of things off the top of my head that I have been doing lately and want to do more of, or have slipped down my list because I don't have time. I don't think any of them cost more than $10 an hour. Nearly all are free or nearly free with the items I already own or can borrow for free.
The things I want to do that cost a lot boil down to:
- travel more
- buy lavish giftsI reckon I can still do a bit of cheap travel, and lavish gifts can be things besides a designer label or other thing that is costly.
And if I retire earlier than my 60s, there is plenty of scope to pick up a bit of extra income if my desires head toward a particular more costly interest, and some of the things I would like to do could lead to some incidental income.
And note my comment was retire in late 40s/early 50s with the commenter having 2 owned properties and $1m rather than 60s with 2 owned properties and $2m. Neither outcome resembles low income.Are there really few things you want to do that that aren't costly to pursue?
@mskeggs: Wow, that's quite a list. My question wasn't one so much about money but options, money certainly doesn't bring happiness but it does give you options. I gave up full time work a couple of years ago and work 3 days a week currently although my husband is still in full time employment and we weigh up the pro's and con's of retiring regularly; when is the best age, how much money is really enough, will we be bored, etc? I ask this question a lot and yours is the most comprehensive reply I have received, so thank you.
I'm not wealthy enough to retire yet, due to choices to spend more on lifestyle trade-offs along the way. Which I don't regret, but I could certainly use the foregone cash!
But I have thought about the subject long and hard.A huge issue that is poorly dealt with is how much work plays into ones self image.
I took the best part of a year off when my daughter was about 2yro, and my partner worked a fair bit of that time (I'm male and we have a traditional nuclear family).
I found going from an up & coming executive to a stay at home Dad was very confronting when I caught up for a beer with my mates who were off conquering their careers. I made a great pasta sauce from super ripe tomatoes I saw at the markets that morning, they cut a deal with a Prime Minister's son to access a new market. People I met took me less seriously than they would have when I was a worker bee because they were unable to slot me into their framework of hierarchy etc.
I was a fair bit younger then, and less self assured, but I found it really isolating (even though it was a great time for me that really helped me examine where and what I wanted to be in life).I've known quite a few blokes who retired early, and almost all have had, I think, similar issues. They go from a pretty high level of success, being the boss, or highly respected in their workplaces (because these are the people who amass the financial resources to retire early) to spending 20x the time with their spouses, being at a loose end as they try and establish new interests as they have quite often had little time for non-work interests.
And they find success in other fields hard.
If you have made plenty of cash as a stock broker or a senior bureaucrat in the government, a substantial part of your success is about having a team of staff who provide you with information and help, and a bunch of clients or staff hungrily (or trepidatingly!) awaiting your decisions.Go from that to playing golf and you suddenly discover you are an average golfer at best.
You go fishing down at the pier and the unemployed, heavily tattoo'd teenager smoking rollies is catching many more fish.
Your cooking is OK, but doing the dishes after is not invigorating.
You could buy a garage full of woodworking tools, but what if you aren't particularly good at that either?
You have been above average for years, and now you have thrown away that life and are average or worse, in the things you thought you would be spending your time with!In my experience, about half of these guys go back to do some consulting or other work where they can regain their past glories.
The other half kick on and become the back bone of the local Lions or Rotary or other volunteer places and effectively invent another whole life for themselves. One guy I know in his 70s chuckles at me when we go to a community meeting about how glad he is to be hanging out with a bunch of young people (like most volunteer places, this one has members largely 40+!)So my conclusion is to work until I have enough to keep the roof reliably overhead, and some tasty food on the table. Assume I can probably produce some income if I need to along the way, but as a supplement not a need. Find lots to do with my time, find plenty of people doing good things who I'd like to help and want my help, and keep old friendships alive and keep making new ones. Figure enough in the rainy day account to rescue any kid in real trouble, or to deal with a left field disaster, but not so much that I need to work much longer than necessary.
A big part of life is knowing what you want from it. Some very small number of people seem to know what they want and are happy when they get it. A much bigger number seem like they know what they want and yet are unsatisfied when they get it. Maybe the bulk aren't sure, or what they want keeps changing. My 16yro is worried she doesn't know. I'm in my 40s and worried I don't know, my Dad is in his 70s and isn't too troubled by it. I figure keep going, doing things that are interesting, useful and doing good and it will work itself out. It isn't just the world changing, we change too, and things that used to be the worry change over time.
I remember clearly worrying about my fashion choices as a teen (apparently to no purpose if you believe the cruel women of my teenage life) yet spend maybe 3% of that energy now thinking about what to wear.
I can imagine similar changes ahead of me where I wonder why I was so concerned about money, being able to see in hindsight it all worked out, or (hopefully!) why I dwelt so long on the best way to raise my kids when they turned out to be such happy adults.What I am hoping to avoid is a situation where I blindly kept heading in the wrong direction because I didn't consider it properly, or lacked the fortitude to change. We'll see.
In your case, cutting back to part time certainly seems like a great move if the finances are good. The only thing I have noticed, and you'll see in the opening to my comment, is the ability to control ones time is a huge benefit as well.
Three day weeks are hugely better than 5 day weeks, but I reckon 3 days at the schedule of a boss has about equal freedom to 4 1/2 days of work where you can set your own hours. Control over how you spend your time is worth a lot.Maybe you and your partner can both cut back and ease into retirement. OR maybe not into retirement at all, but just a reduced working life. I don't think I will ever stop working, just maybe start doing some of the work activities enjoy for a boss that doesn't pay me and where I can set my own hours, rather than a fixed timesheet with a cranky boss who can boss me around.
Are those same activities still work if I do them willingly for a boss I choose, without pay?
I suppose the rollercoaster tester rides the rollercoaster free, but finds it work because it is at his boss' direction, yet we would have to pay for the same activity as recreation.Sorry for rambling a bit. As I said, it is something I am thinking a lot about too.
@mskeggs: You are about a decade younger than me but we have a similar mindset I think. I gave up full time work where I had a relatively large team to a job at a different company where my role is one similar to that of those reporting to me previously (I hope that makes sense). It took a few months to get used to not making the decisions however the role I have now is flexible in that I can work anytime between 6am and 9pm and can change the days I work if need be, that plus I work on my own travelling about the place, so not as much corporate bull to have to put up with. The downside is that it can be mind-numbing at times.
I have had a bit of a chameleon career and don't care about status so much as happiness in what I am doing so I could stop work tomorrow and be ok. My husband on the other hand has worked in the same industry and the same company for decades so to go from that to not working is not something that would be good for his mental health for the reasons you mention with your friends. So we go around and around with starting his own consultancy and the feasibility of it both practically and financially.
I love a ramble….as you can probably tell. Thanks for your input, you really have helped.
Maybe I should start a 'are you ready to retire' support group and have that as my post retiring focus ;)
Maybe I should start a 'are you ready to retire' support group and have that as my post retiring focus ;)
Get your spouse to start it, inviting comments. We'll all contribute. He'll realise that the best good he can bring to world is helping others who can't work out the path from full on work to letting it become much less of their life is a path he can help show, and he will have something currently underserved he can work to make common.
Voila!
(OK, not quite easy, but I always am amazed about high achievers who sometimes are readily able to channel their firehose of work power onto the next challenge. A current example is Michael West, ex-Fairfax finance journo. He has basically taken all the scandal, sacred cow, and rumour I would guess have been his stock in trade that was previously uncomfortable for him to investigate for his paymasters, and gone wild. Presumably, for $15k a year in donations, versus $150k as journalist. But we aren't talking about money making today, we are talking about life satisfaction. And his must be really high right now).@robbyjones: For people unsure about early retirement (both financially or mentally), options to trial it include:
- Parental leave (especially for the male) for at least 6-12 months given as an example by mskeggs
- Career break - try one year, perhaps with the guarantee of a job by your employer, and then multiple years.
To have the financial part covered you need to be a bit financially savvy - to start early, etc. (and earning a big income but having low expenditure helps).
For the mental part, some questions that could help include: do you have broad interests, are you curious and do you love learning (narrowly and broadly), are you multi-skilled, is the source of your self-worth internal or external and how sustainably do you live your life?
For me
- I have thousands of books to get through, but lectures and short courses and documentaries have taken up a lot of my learning time over the last 13 years, and I have heaps of these that build up quicker than I can get through
- I want to get really good at a sport I played recreationally when younger (I did this with a different sport which involved training 5 days a week for 5 hours each day, but this time it will be much harder with a family)
- Walking and being active with the family for at least 1 hour each day (with young kids we do it twice a day, in the morning and afternoon)
- Growing as much of our own food as possible (we currently have productive fruit trees)
- My publisher is looking for another book
- Doing more of the renovations myself
- Getting the folks to stay over more frequently and for longer - e.g. so I can help Mum's with her PC proficiency, while learning her recipes, and us cooking for them to get them to eat more healthily and be more active (e.g. taking them on walks with us)
- Spending more time with my siblings (it's easier if one of us is a bit flexible), connecting with friends in person and meeting new people (e.g. Last Sunday I had the most interesting conversation with a doctor and her engineer husband who have been married for 57 years after a performance by a small Ugandan choir!)
- Rediscovering my artistic side, which has been on hold since after high school
- Investigating my spiritual side
- Finding more opportunities to share my experience and expertise with others
- There's my investments and businesses that mostly let me get as involved with it as much or as little as I want
- Sharing more and more of this with the family, especially as the kids get older.
You might find Richard Bolles' concept (also a book) The Three Boxes of Life interesting (he's famous for another book).
How much is enough is very difficult to ascertain without making broad statements like $10m.
It also comes down to what quality of life people want at their twilight years, and what they wish to leave behind (if any).
Personally I think its important not only to retire comfortably, but to leave behind a significant amount of wealth for my children.
At a minimum a retiree must have their own home paid off by the time they retire, this forms the basis for comfortable living as you are not exposed to cost of housing when there is little to no income. Alternatively if a person is a lifelong renter, there is nothing wrong with that, but in that time they must have saved and invested the difference between renting and mortgage payments. Obviously no one knows what rents are going to be like in 10, 20, 30 years but a lifelong renter should at least have $1m.
Why?
A typical Australian's life expectancy is 85, one would on average retire 65. So that's 20 years you need to pay rent. Going by $400/week rent, thats $20k a year for 20 years = $400k BEFORE eating, bills, travel, Eneloops, Viagra and presents for the grandchildren.
One thing that Australians should not rely on is the Age Pension. As of right now it is a growing problem for the budget and the gov is already playing silly buggers with age eligibility.Fast forward many years from now we will have even more retirees, less workers per retiree and a bigger budget issue. I can see the Age Pension being a safety net for a minority instead of a tie of passage for most Australians now. The gov also has tinkered with things like Pension indexation (reduction of). All these things were previously untouchable in fear of the grey vote, but we can see governments are left with less and less choice but to trim such huge budget burdens.
If your retirement plans include the Age Pension as it is today, re-assess and assume you won't even get the full rate of pension.
TL;DR - Own your own home outright and $1m.
Going by $400/week rent, thats $20k a year for 20 years = $400k BEFORE eating, bills, travel, Eneloops, Viagra and presents for the grandchildren.
Well, sure, if you are one to stick your money under the bed, give up all work and live off the horde. Another way to look at it is if you invest $400k with a 5% return you will still have it 20 years later if you divert the income to rent. The risk with renting is inflation outstripping investment earnings, which is why owning a house is less risky in case the other investment performs worse than rental growth.
All these things were previously untouchable in fear of the grey vote
Not sure where you are getting the idea the pension is less generous than previously. By almost any measure against almost any time period, it is the most lucrative it has ever been.
The changes being made are years in the future, not affecting any currently grey voters. Even the indexing change hasn't made any difference as wage growth has dipped below CPI, so still the pensioners do better!
While I agree that pensions are likely to be reined in somewhat, as they are very generously offered to even extremely wealthy people now, it is reasonable to expect the pension will continue for lower income people.
I also expect you will see the pattern repeat, with newly grey voters in decades to come having their votes bought with renewed pension generosity, much as today's have.TL;DR - Own your own home outright and $1m.
Owning your home and having $1m in investments is a cool goal if you enjoy working and want to work all through the prime of your life. OP desires to take it easy, so this would be a poor plan for them.
Remember that a lot of people on a bargain site are here to maximise their lifestyle, not their wealth accumulation.leave behind a significant amount of wealth for my children.
I'm wary about this. I'll probably apply Buffett's principle of leaving them something so that they could do anything, but not so much that they could do nothing
hehe Brillant! If only we could put 'old head' on 'young shoulders'. Whilst I resent the fact that I have had to struggle so much in life, it has certainly taught me the value of money.
I think that a better question is "How much is too much?" Whilst I have the fear of poverty, I am also trying to be charitable and donate a decent amount to charities. Thank God for MY luck in life. BTW over 60 yo.
A surgeon makes 500k pretax. This is a good starting point. At a 4% safe withdrawal rate, one would need 500/0.4 = 12.5M in invested assets - this is in addition to a paid off PPOR.
equiv of $1M at age 60 + some kind of place to live paid off
just live off the interest / dividends.
But if I live on the pension in say Burma
Invest spare cash in local businesses
Shouldn't I theoretically be able to live forever?Shouldn't I theoretically be able to live forever?
In theory you could, but in practice you won't. ;)
In a previous post a poster mentioned that retirees have issues with self image and keeping themselves busy.
I don't understand people who define themselves or their self image by the work they do. I can't wait to raise the proverbial finger and walk away to really live my life the way I want to.
If you are relying on super, At age 60 You need approx $1m - 1.3M in super for a couple to keep you going until well into your 80's (barring serious illness/unforeseen events.)
Look up articles on the 4% rule.
Essentially, how much you need to retire on all depends on how much your annual (expenses) expenses are.
My SMSF super split:
1500 eneloops
39 fidget spinners
16 x 3TB hard drives
13 headphones
12 earphones
12000 useless 5 cent gadgets from gearbest/banggood/aliexpress etc