Hey all, drinking some retirement(?) whisky rn but just curious what people's strategies are for FIRE (Financial Independence Retire Early)?
I think I've been pretty smart with my money but honestly don't feel like my shares are doing great, and my investment property isnt exactly making me capital gains. Overall can't complain about life but I think it never hurts to learn from the best!
So what's your secret??
People are supposed to use superannuation to fund their retirement and be financially independent of the government (the ages pension costs the government 40 billion a year, and the health care costs of people in that age bracket are also very high). Cashing the money in and living like a king for a while (overseas holidays, expensive cars, high end TVs and electronic gadgets) in order to qualify for the aged pension is immoral.
And people should pay full retail, otherwise retailers wont make a profit…
Cashing in super Its permitted by the system. Very easy for a government to change. Just like other system allowable perks eg 4WD 4 Door ute as a fringe benefit.
Note mystertai says you have to learn how to live like a pensioner to make this work. Thats not as easy as it sounds AND they weren't advocating living like a KING as you claim, they just said retire "early" As permitted and live on your super UNTIL the pension kicks in. They never said fritter it away on unnecessary spending. To repeat, they said "live on as little as possible" (very Ozbargainish)
I do not own a car at all. I have a cheap Kogan TV. I do have a mobile but it's not an Apple or Samsung. It's a much cheaper Huawei smartphone. The laptop I'm writing this on is old..so old it's still running Vista. It still works.
I have no intention ever of living like a king. I will always try and spend what the Age Pension pays. I therefore won't have a shock when I do get to Age Pension age and be forced to live on what many would consider a significantly reduced income. I think it's a reasonable income. I get everything I need with enough left over for what I consider luxuries. I have take-away's, I eat out, generally in informal restaurants such as pubs, I don't like most formal dining restaurants anyway, I drink alcohol, I do go on holidays.
I'm in my 40's, no longer work, have a low income health care card which gives me some quite good discounts on many things and use Medicare. I do not have any private health insurance.
The Age Pension pays a single person $907.60 a fortnight and a couple $1,368.20. I consider that enough. But…it only is enough if you own a house and therefore have no mortgage debt or rent to pay and you must have no other debt.
To not qualify for the Age Pension as a single person you need to earn more than $1,987.40 per fortnight. To me that's a lot of money. Without any debt, rent or mortgage to pay I wouldn't know what to do with it. A couple needs to earn more than $3,040.40 per fortnight.
Being completely financially independent of all government subsidies cannot work in this country unless you've got millions and for many including me that is an impossible dream.
So okay call me immoral. I'll accept that. I've worked, paid taxes and saved and having lived so frugally whilst saving I can now live without ever having to work again and without fearing living on beans on toast in retirement.
Out of curiosity, why retire so early and live on low income? Mind you, I think you can live quite comfortably on an age pension income of ~$24K per year if you own your home and don't need a car…and a savvy ozbargainer
To me working for an employer is too stressful. Commuting in crammed public transport which is frequently delayed causes me stress. I did have a car in the past. Driving in peak hour traffic is awful so I usually parked at the station and caught the train in. I figured out I may as well just get the bus that stops right outside my house and forget about the car.
What else could I want. I've got a roof over my head. Yes it's not an expensive or large property. It's small and suitable for my needs. I've got enough to pay the bills, put food on the table and go out on a regular basis. That'll do…millions of pensioners can survive on that so don't see why I can't.
You know what, I can see your point here. The system is what it is, you're not rorting it by having an income but not reporting it (or anything like that) so I don't see that you're doing anything wrong. I personally think our government benefits should be scaled back so that you can't depend on it like you are, but that's another argument entirely.
I think most people's disagreements are with:
The notion that you're entitled to benefits - legally yes, morally or in terms of fairness - not really. I very much doubt you've paid enough in taxes over and above maintenance of general public services to have earned how much you're drawing or will draw from the Age Pension; and
$907 a fortnight for a single person with basically no expenses is more than enough to live on, even including rent because - if you're not working - you don't need to live close to any CBD anymore and so can afford to live somewhere far away with cheap rent; and
It's perfectly possible to be self-sufficient in terms of finances in Australia without needing to rely on government subsidies. It's one thing to make use of them, it's another to actually be dependent on them to the point that you'd literally starve without them. If you're not - that points to poor financial planning than anything else.
I think my problem with working is that I earned far too much working in a very stressful job and I became disillusioned with it. I was earning 4 times minimum wage yet living on almost nothing unable to find the time to go out and relax, commuting and working so many hours and being so tired after work I just fell in to bed to repeat the same the next day. I did try working about 9 months on 3 months off going away on holiday for a while but the stress having to find another contract and having to explain my absence from the job market was difficult as well so I just concentrated on reducing my expenses and saving as much as possible.
I do have to rely on government subsidies. They exist for all I may as well use them. Health care in particular. Medicare pays 75% of most out of hospital treatments the government pays the rest. As I don't mind waiting for treatment I can choose a bulk billing consultant and wait to get free treatment. I wouldn't starve I just have to wait. Any emergency health care is free as it is for all in Australia. We are very lucky to have Medicare.
What else could I want? I have never wanted to waste my money on fancy restaurants always opting to dine somewhere if there is a discount or voucher available. I don't like wasting money. That's just me.
Even the government own retirement estimator says it's fine. Enter in my current age (45), my superannuation balance ($300k), age at retirement (60 in my case) and it says I'll have more than enough until it runs out at 90. So my aim right now is to have enough to live on until I'm 60 then rely on my own money from super until 67 then rely on Age pension and superannuation until 90 then rely only on the Age Pension until death. If I don't have enough then well I'll have to go back to work. That is always an option.
To be a FIRE you're supposed to have 25 times your annual expenses saved. Reduce your expenses and that target figure drops quite dramatically. So my annual expenses are about $24,000 and my savings including what is in my superannuation is $600k. It works. Remove 4% each year the balance grows by 6%. My net worth does not reduce.
I must keep a close eye on it to keep it on target.
I'm not sure this is helping your argument (insofar as there is one I guess).
I was earning 4 times minimum wage yet living on almost nothing
You should have been able to save a tonne of money during this period though, including making property purchases, so you would've been in the perfect place to be financially independent and retire early without dipping into government coffers (medicare doesn't count) like the Age Pension.
Not that I have a problem with it - as you say, the system is what it is and everyone's voted for it, so you may as well use it, but I'm a little surprised you're in a position where you'll need to resort to the Age Pension at all. But you do seem to have it all worked out, so as long as it's not a surprise to you, that's all that matters.
I'm not sure I understand. I did save a tonne of money. I own an investment property and have what I would consider a healthy superannuation balance.
I could if I wanted to go out today and buy a car….but multiply the expenses such as registration and insurance by 25 and that means I would need another $50,000 saved just to cover those 2 essential expenses.
That's the whole point of FIRE. Reduce expenses. I'll walk, get the bus, train, plane, hire a car or van if necessary. I'm not buying a car and having all that hassle again.
I did save a tonne of money. I own an investment property and have what I would consider a healthy superannuation balance.
Oh. Maybe I'm just underestimating how much super is required - I would've thought taking all that into account, including conservative estimates for capital gains in your investment property, you would be fairly set and (again) not need to use the Age Pension.
Edit: Ah, maybe I'm not taking into account the early retirement at 45. That's 15 years of drawing down on super+related savings, rather than adding to them.
@mysterytal:
I don't think the 4% safe withdrawal rate takes into account additional money from the age pension so you should have much more money to spend at 67. If your net worth remains the same at 67 then you probably won't be eligible for the age pension.
Spend every cent I have on Eneloops.
My retirement plan consists solely of walking down the street one day, and coming across a winning lottery ticket.
If that doesn't work out, I'll be HighAndDry
I'll be HighAndDry
…. BUT somewhat EnPowered!
He used to be alright but has turned into a bit of a humble bragger.
I love Mr Money Mustache.
Particularly enjoy his sense of humour, his message of personal ownership and responsibility and especially when he sticks it to the "waah waah complainypants" excuse-makers of the world.
I have considered myself semi retired for the last 5 years. I work maybe 10hrs a week all up and half of that is from my phone. I started one company about ten years ago and grew that etc etc. I invested in myself and it paid off. I do not live frugal as I grew up in that environment and it sucks. How shit would it be to spend the next ten years counting every KW of electricity and than pop off from any number of random things before you can retire early. F that. Life is short and you get one go so have fun and enjoy it while you are young. Some of my best memories are the crazy wild nights of dropping $$ while out on the town in various countries… not sitting at home under three blankets because I am saving $1 in electricity spend. Lame.
I work about 10 hours a week but turn up for 40
I don't work at all and the government pays me.
I'd say try to have (your own idea of) fun and enjoy it while you are young, middle aged and old. Though realistically it's the most difficult when you're young unless you're lucky. Your idea of fun certainly doesn't sound fun to me though.
It is possible to retire by the age of 40 if you earn good money and save hard. But thinking about it why would you want to? You'd have to live very fragual for the rest of your life. I'd rather keep working but do less hours, enjoy the extra money (travel, better car/house) and make it known that I can I walk out whenever I want. In other words keep working but be very care-free about it.
All in crypto
My secret? Live on as little as possible. Try and live on what the Age Pension pays (excluding mortgage, loan repayments and savings contributions) and get enough saved to last until you qualify for the Age Pension. This would really only be possible if you own a house. When you get to your preservation age cash out any money in super and live on that for a few years just before you claim the Age Pension.