Hello!
I am about 20 years away from retirement and I am wondering what a $70k spend looks like.
In 20 years:
I enjoy eating out a couple of times a week and as for travel would see myself doing overseas travel 2 times a year.
Any one currently retired and on $70k/year?
You can only live off cashflow, not equity.
You can exchange equity for a big pile of cash.
selling an IP tends to incur a big pile of CGT
$70k a year now, will be different from $70k in 20 years
20 years ago (2004-2005), $70k would put you in the top tax bracket. I would hate to think how much it would cost to survive in 20 years.
The calculation about 20 years ago, was having $1M in the Superannuation account,
ie. for the "last 20 years" between 65 - 85 years old, $50K is the 'comfortable income' to live on.
There were people on Commonwealth contracts or in academia, who got 15 - 17% superannuation contributions
and I think when they hit retirement, in the last 10 years, they were quite comfortable.
Unless a person has their primary residence mortgage free,
then, there needs to be some kind of income (superannuation? children? investment property?)
to be able to spend the minimum amount annually about $5 - 8K for council + electricity + water PLUS food PLUS any medical bills/insurances PLUS internet PLUS mobile + subscriptions.
Then, there are dependent(s) too, eg. elderly parents? spouse? etc.
So, I reckon Australia might actually see a growing "reverse migration", ie. people emigrated here when young
but needing to leave Australia, when they're old for a better quality of old age.
Australians are already retiring to a number of way more affordable destinations in South East Asia, then returning to Oz when they hit the very late age of needing to be placed into an aged care facility.
In 20 years time, $70k would be the tax free threshold.
retire to south east asia and live off the rent like a king?
the rule of 72 for doubling (rate x years=72) indicates that if inflation is 3.6%pa for 20 years then costs would double.
some things like real estate might have gone up more like 5-8%pa over years, in which case the cost of buying might have doubled in more like 9-14 years
peaking in Feb-2020, my real estate showed 7%pa growth over the previous 10 years - just before COVID lockdowns, the world changed, and values went down the toilet, going negative for 4 years.
Last month's figures showed my real estate growth over the last 10 years as MINUS 2%pa.
So there's that … ;-)
so would the equity on his house and investment property and the rent
In 20 years time, probably will be looking at $200k a year to have a decent retirement with no debts.
You have to remember - its tax-free zero debts. Based on target inflation 70k would be ~130k in 20years.
Tax free for now..
I thought you were talking rubish, nope you're on point at 3% per year damn that's ridiculous.
20 years is a long time to be paying debt. I wouldn’t get too excited.
You will be comfortable but that is probably not the lifestyle you are used to living. But like others have said, $70k today will not be the same as $70k in the future.
Surely with 20 years left putting money into super until you retire and you have an investment property you will be able to have more than $70k income?
my investment property worth $770k will be close to be paid off
If you are paying this off, while not maximising your concessional super contributions, you're doing it wrong.
If you are, I dont see how super (including min 20 years of max concessional contributions), in a high growth fund, doesnt end up with a higher retirement income than $70k/yr
At what age is optimal for maximising your concessional super contributions?
The earlier the better, but knowing that $ is locked up till super access age
If I'm in my early 20s is it even worth considering right now though? Outside of investing into index funds & saving for property investments
@TheFreaK: That's only a call you can make re your finances
Saving for a house is likely more important if that's a goa, than ETF buys, than extra super.
extra super up to $30k/year concessional limit likely has highest ROI (tax bracket depending), but things like saving deposit for a housing have a more noticeable timeline/lifestyle benefit
@SBOB: I did both, since I started my new job in Jun 2021, I've been topping up my super contributions, currently sitting at ~$26,000 py, I'm thinking of raising this up a bit more to the cap. My wife and I purchased our first house in Nov 2022, and aggressively saved for the first few months.
I've started looking for new work, and I hope that the additional income that I get from a new job could be pushed into buying ETFs, nothing ridiculous but it would be nice to contribute about $1000 a month. Between my super, a few extra mortgage contributions and ETFs I think I would be covered. The idea is that by the time we pay off our first house, I'd like to have had ~10 years of ETF contributions growing so that we could either direct money into that or use it to purchase an IP etc.
For the long term super ROI is pretty much the gold standard, a lot of people don't like it because they've locked up their money until their 60s which is why ETFs are pretty awesome but for me, my parents and grandparents made their wealth off of their homes, I don't think my home will ever appreciate like theirs did.
I would personally try to contribute a bit more to my super without significantly impacting my savings target for my first house deposit.
@TheFyrd: We all need to get the best outcome from our money. Interest rates have risen to the point where you may be better off paying down your mortgage and using the equity to renovate of purchase another property. The wealth that people have made from residential property doesn't necessarily provide for their retirement unless they downsize. They're more likely to sit on their PPOR as an inter-generational transfer and live modestly in retirement on the age pension.
@sumyungguy: At the current rate, it looks like we'll be paid off in about 10 years, although I'll keep the mortgage open I just want to ideally offset it completely. I think it's pretty much always better to invest extra rather than have equity because at the end of the day, they are linked. Your market returns will take into consideration interest rates and the cost of doing business. We're just trying to balance both, and hopefully, if I can earn a bit more through another job that will also enable us to invest in the market.
Every fortnight I allocate my money to various "initiatives"
Bills, Super, mortgage, Savings offset which makes up, extra mortgage, savings for big purchases (such as home gym equipment aka my slush fund, holidays, renovations, new car) and soon ETFs, any leftover money just sits there and is for short term spend.
@TheFyrd: Being able to pay off in 10 years means your property price may be too low. It suggests you have way more borrowing power so you should be able to leverage this into further investments.
a lot of people don't like it because they've locked up their money until their 60s
Hypothetically speaking, they won't like it either, if/when this age-limit is raised to the 70s in the future.
@TheFreaK: I would say a definite no. You'll need access to your funds for so many things in the decades ahead so unless you're expecting a sizeable inheritance then you shouldn't lock away your savings in super.
Depends on how long you are expecting to live for.
Most likely like inflation increasing, his income will also increase. Assuming its rent from IP and other income sources.
Who knows, but keep in mind.
$70K now isnt $70K in 20 years time.
If your house is fully paid off then your income needs wont be the same
23 years old son may or may not be a cost factor. Depends on whether they make the mistake of moving out before then AND you repurpose their room so they cant move back in.
Depends a bit on what age you retire at. Sixties is all go, but you start to slow down in your seventies. Most older people find they don't spend very much late seventies into eighties because they don't do so much anymore. So allow to spend more in first 10 years of retirement, tapering off pretty noticeably after that.
Last year, I took 6-months off on long service leave at half pay (roughly 75k per annum over that period) and it was a good test case to see how I'd cope on a similar wage in retirement (in about 12 years time). I was able to live my usual life and still save money (my home is fully paid off) and that was with 2 young kids. You'll be fine.
And if not. Your IP will be worth roughly $5m in 20 years time (if it grows 10% per year - not an unfeasible outcome). If your $70k inflation adjusted retirement isn't enough, then sell it and you’ll be swimming in it. Stress less and enjoy your children while they're young!
Your IP will be worth roughly $5m in 20 years time (if it grows 10% per year - not an unfeasible outcome
bahahhahahaa
There are Perth had zero price growth over a decade.
Same might be the case for Melbourne.
It only grew in WA because of COVID and now we have our population increasing faster than we can produce liveable dwellings, so prices haven't come back down.
If this gets figured out, then WA will become cheap again.
I know at least 30 people that have moved from WA to an Eastern state and the primary reason was ping in Video Games, if this is solved Perth prices will appreciate.
and the primary reason was ping in Video Games,
I used to be with ‘it’, but then they changed what ‘it’ was. Now what I’m with isn’t ‘it’ anymore and what’s ‘it’ seems weird and scary
Ping is a function of the speed of light and where the servers are places for the games. It wont get faster unless they move the servers closer to the players but since the player base of WA is small it most likely will not happen.
@adricl: Direct line of site via satellite has much higher potential throughput and speed than single and multi mode fibre though.
Simply put, satellite will improve enough for ping to be low and indistinguishable basically anywhere you live.
Instant transmission rather than light signals going on and off over KMs (speed of light).
Obviously not everyone currently is running fibre to the home and most still use copper within the home (think cat cables etc)
Source: ACMA registered cabler with Data, Satellite and Fibre endorsements.
Direct line of site via satellite has much higher potential throughput and speed than single and multi mode fibre though.
Really?
Got a source or reference for that? My eng brain automatically says 'yeah, nah' but happy to be educated :)
Instant transmission rather than light signals going on and off over KMs (speed of light).
Can't transmit information faster than light. But maybe you mean speed through vacuum vs fibre.
@ck: ozb is wild, where else would you get a technical analysis of ping on a post about retirement savings
Can't transmit information faster than light
The interesting thing about light, is that it can be a particle and a wave at the same time.
Then, you have the interesting properties in quantum physics, where that "information" could exist in different places at the same time.
@ck: Spot on, this is what I referring to.
Speed of light around earth would be around 70ms max (through a vacuum), fibre is about 2/3rds speed of light.
But yeah LEO will outpace fibre, and Laser even more so, Laser can do full speed of light (50% quicker than fibre) as it communicates through the vacuum of space (possibly dyson can build the infrastructure for the vacuum).
Now for theoretical stuff we can go down the route of super-positioning and ping becomes a non-issue no matter where the matter is in the entire universe (NB: We’re already there, everything is super-positioned already, we just don’t know how to harness it, if we do the universe will collapse in on itself so better to not try)
@ck: Starlink (supposedly) orbits at ~550km. The Kármán line is at 100km. So ~20% of that trip is through atmosphere (albeit decreasing density).
Personally, I don't see how Starlink will be able to outperform fibre on throughput. Latency/ping I can see happening. But not throughput; not without being non-competitive on price.
@Chandler: Hardline fibre is the goat but it'll come down to price and I think it'll always be cheaper to dig on earth than send satellites into space, especially when the cost of laying more cable is exponentially cheaper, where's satellites will always be expensive.
Can't transmit information faster than light.
Yes you can!
Read about quantum computing and watch some scifi. As many clues as I'm giving 👍
Considering I've had my house in Melbourne for 8 years and if I sold it tomorrow I might make 30% profit max.
Your IP will be worth roughly $5m in 20 years time (if it grows 10% per year - not an unfeasible outcome)
The growth is not sustainable,
ie. unable to sustain / maintain like this.
Around my wider neighbourhood, what took 100 years to increase in price [years 1900 - 2010],
has taken that 100-year growth to 2x over 10 years [2010 - 2020],
and that growth of 10-years, to 4x over the Covid years [2020 - 20224]
It has become so logarithmic and something has to give.
Our entire existence of struggling daily, is attached to some digital numbers,
so the while the suffering of work is real, but those digital numbers stopped being "real" and is all funny money now.
The growth is not sustainable
+
numbers stopped being "real"
=
manipulation
Wage/salary rises aren’t 10% per annum so at some stage house price growth will stagnate
Agree.
I really think we've peaked with house prices, and the 'new target' has been set,
and it'll hover around here for the next 10 years, before the next reason to start printing money, ie. some war.
ie. some war.
How do I put this politely. That war will f**k you up - money will mean nothing!
OP you're sorely delulu.
70K is living about 1 hour out of the Melbourne CBD, struggling to pay your $550 a week rent for your 2 bedroom unit, food, bills, petrol etc
Buuuut, you own property, so you'll have at least $600 a week to splash
Surprised nobody mentioned the huge tax savings in retirement.
$70k after tax requires much less income when retired than a worker.
I think OP means 70k a year no tax.
Wish I had $70k after tax and mortgage and kids were all paid for.
Would certainly be in the top 20% of households.
In terms of free cashflow? Top 10%?
How does your superannuation balance compare for your age group? You can't forecast the value of your PPOR; you're likely to offload your investment property when you realise its comparatively poor performance; your son is only 3 years old. That's an awful lot of living ahead.
# A overly simplified way to calculate inflation, pretend that yearly inflation is at 4% and the raw value of your income doesn't change
def yearlyInflaction(money):
return money / (1+inflaction)
money = 70000
inflaction = 0.04
years = 20
for i in range(years):
money = yearlyInflaction(money)
print(money)
print(money)
Who do you think you are? The Federal Reserve?
lmfao you got me mate
Would it have been due to your inflaCtion rate?
Who do you think you are? The Federal Reserve?
Neither is it 'Federal', nor are there 'Reserves' !
Where is this $70K coming from? Is this not indexed with inflation?
Seem odd to have a $70K income stream now, for use in 20 years.
Invest the source wisely and it should give you more than the equivalent income in 20 years.
I am about 20 years away from retirement and I am wondering what a $70k spend looks like….
Any one currently retired and on $70k/year?
What have you based the $70,000 figure on?
Are you assuming you will need $70,000 pa in 20 years time based on some sort of inflation of your current outgoings or just pulling a hopeful figure from a hat?
Or are you asking if anyone is able to live on $70,000 pa right now?
Do you know exactly how much you spend at a minimum per annum right now so you have some sort of comparison?
Could be referring to ASFA Retirement Standard, budget for those aged 65-84 (June quarter 2024), comfortable lifestyle, couple $73,337 per annum
he probably means today equivalent $70K in 20 years
if he got assets, it pretty simple, his income and asset will rise with it in 20 years' time so whatever it is in 20 years
he likely getting similar to $70K today in equivalent
simple example I got a few shares that I had hold on for the last 10-15 years
when I got them paid around 4-5% yield in yester years share price. ($45) = $1.80 dividend
Today it still paid 4-5% yield based on Today share price dollar ($130) = $5.2 dividend.
Same goes with rent and properties, if you are getting 3-5% yield some 20 years ago
on the purchase price you likely to get 3-5% yield on today price which is higher than 20 years ago
Sounds like your in a fantastic position. Some are saying $70,000 in 20 years wont be the same while thats true there are plenty of people having a good retirement now on $50,000. Remember with your current home you have the ability to downsize and the investment property you have options.
They may be having a "good" retirement now on $50k, but the OP stated he expects to be able to do overseas trips twice a year for holiday, unless we are talking a ferry across the harbour I think that will be a serious struggle in 20 years. e.g. if inflation stays at just 3% then in 20 years time you would need $90k to be at the same place someone on $50k a year is on now. So $70k in 20 years time is LESS than someone on $50k now.
which job do you haver now that you are so sure will exist for the next 20 years?
Are you married? What makes you think it will last 20+ years?
what is retirement
You can't possibly be worried about retirement with $2m+ in assets. Nice humble brag though.
Can't comment on what $70K spend/year looks like because I'm not there yet, but it does depend on if you're doing it alone or if you have a partner.
That aside, get yourself some good financial advice & tax planning advice. Make sure that your investments are structured correctly, your super is setup and invested in the right way, should you have a family trust perhaps? Is your investment property really the right investment (ie. what's the real return it gives you), vs putting the capital into your super and other assets?
20 years is a good period to grow your super - and if invested correctly it should at least double and double again before retirement (plus you continue contributing throughout the next 20 years and look to maximise your contributions as best you can).
The government won't let you retire until you're 85 years old.
will you be living in the same 1.4m house when you kid/s move out? if you downsize that's a decent chunk of money you can put into super + whatever super balance you will have.
and what industry are you in? depending on what you do for work, if it's a white-collar professional type job you rarely have to stop working entirely, working odd contracts or a few hours a week if you get that luxury is usually not taxing and keeps you busy/happy in retirement seeing you won't be eligible for pension if you want to keep the investment property and income
Are you sure you will be alive in 20 years?
Nobody can predict what will happen today let alone 20 years in to the future.
Enjoy your life,save some money as well and try to be happy.
I'd suggest keep doing what you're doing and worry about it in a LONG time. Your son is now 3. Your health is presumably good. Keep saving and stay healthy but wait 15 years on this post.
70k/year ? I would retire in one of those South East Asia countries and live like a king 😁
Good job OP on being on track to have your PPOR paid off by retirement.
I hope to think your financial situation should be the standard most people with a fulltime job.
Most people should have their ppor's paid off by retirement. Should be able to pay-off within 15 years if debt to income ratio is below 10 times.
It's huge monthly repayments initially but this must be done.
Overseas travel twice a year is great but it will not happen indefinitely during retirement, so just budget that til 80 years old or thereabouts
yep spot on, most people only travel in the first 5 years of retirement, after that it just gets too tiring or your health issues catch up with you. typically your expenditure will be the highest in those five years when your health and stamina is able to sustain the spending, and drop as you get older/sicker
8 years retired and off traveling tomorrow - but yes I get your point - I no longer feel the rush of pleasure from travel and more the tiring stress of long-distance travel - not looking forward to 21 hours on a plane to Europe !
while spending may peak in the Go-Go years when yay-travel, and drop in the Go-Slo years when mobility slows, it tends to peak again in the No-Go years if mobility ceases and 24x7 nursing home care is required.
thankfully we have good safetynet with home care packages that are heavily subsidised, which you don't get in Bali or Russia..and definitely not Texas
If you are aiming to pay off your PPOR and investment property by the time you retire, and have no other debt, 70k on today's value seems ok to achieve the kind of retirement you are after. However, two overseas holidays a year might not be achievable with that budget. I would say you should plan for a 100k/year for a comfortable retirement with 2 overseas holidays a year.
Having said that 70k adjusted to 3.5% inflation per year will be only worth half its value. So plan to achieve a cash flow of 140k in 20 years time (but I would recommend planning for $200k/year cashflow for a comfortable retirement).
20 years is long time and your goals can be achieved (Subject to your income and savings)
70k before tax or after tax
You could live a luxury life in a mansion with pool and servants, sports car in an underground garage, best restaurants and health care in somewhere like Vietnam. So probably doable
You need at least another 2-3 properties then you might be okay
OP has not commented since 13/10 so hmmm - asking about retirement 20 years away ?
as others said your daily cashflow spending doesn't come from equity, so I'd ask where is the assumed $70kpa expected to come from.
Many things can happen between now and then - another pandemic, WWIII, sickness, death or incapacity of loved ones, aged parents with dementia 24 hour care, son marries and needs financial support to buy a home for him and his kids, new car, business, etc., etc.
so the obvious gap is where is this $70Kpa expected to come from ?
Thanks all for your comments.
Started this thread as I’m seeking a perspective on yearly retirement figure (yes, I’m a planner!)
I am currently maxing my super and topping up via salary sacrificing.
In 20 years, everything will go up in price, groceries, homing but I don’t have a crystal ball so I was looking for those who have retired and living off their super, savings what life is like on $70k as this is deemed as ‘comfortable’
The retirement planning sector says you need to run your own numbers. Some people live on $100K, others happily on $50K. Best to review the ASFA breakdown against your own circumstances to understand what comprises the modest and comfortable figures.
Yes, as others have finally said (having deviated all over the place in earlier comments), look at the ASFA assessment. To me their 'comfortable lifestyle' is still somewhat limiting, especially around travel. However other parts of it are a bit higher than I would expect to spend. In any case, you can look at the line items and make an assessment of what you think you will spend; then see what that comes to. Work in current day dollars, forget the whole '$70k in 20 years isnt the same as it is today' - we all get that. But what you can buy for $70k in today's dollars is your baseline; your investments and income will probably roughly track inflation (or above) so it will work out.
Your entire retirement plan and assessment turns on how much you want to spend per year and then how much contingency you want. So this is the key essential first step. Then you figure out how much you need in investments to get that result.
For an income of $70k pa you can also get a pension (at 67 and based on current legislation) and so as ASFA says, you can retire without a huge portfolio and utilise a part pension.
Ignoring the pension (although I think there will always be a pension, but some of the rules might change), the rough rule of thumb is that you need between 25 and 30 times your annual expenditure to maintain an inflation adjusted income for 30 years (google '4% rule'). So for $70k pa inflation adjusted you will need around $85k pre tax (a bit less depending on your age) or around $2.15m to $2.5m in investments; however if the income is split between 2 people (both with the income tax threshold) you need less and for super there is no tax. Hence if you are reliant on super only you will need about (70*25) $1.75m.
All in today's dollars obviously. And ignoring things like reverse mortgages, downsizing etc
You should google up 'financial independence retire early australia' and have a look - there are a lot of articles and analysis. The first few links (Aussie Firebug, Strong Money) are a good start, also look at https://passiveinvestingaustralia.com/
Keep in mind once you move into retirement phase, your savings in super is tax free, so keep pumping into super
In terms of retirement planning, the ASFA basic and comfortable retirement guides are a good place to start. These get updated regularly too. Super income is tax free in retirement so $70k would be the equivalent of earning quite a bit more in a job. If you don't have a mortgage any more then it would be just fine for a lot of people.
A big question I guess is how much the age pension will resemble current arrangements in the future. Right now it is possible to have a decent retirement with a relatively modest super balance because you get the age pension (or a part pension) too, meaning you need to draw less from your super.
A big part of bringing in younger immigrants is towards funding things like pensions, because our ageing population was going to make it very difficult if there were not more younger workers providing the tax base to fund this stuff. The age you can start receiving it has already increased to 67 and don't be surprised if it goes to at least 70 before too long.
Ah, the reality of it all. OP's son is 3yo and the dream of retirement is already there.
hey I'm currently in this situation - what questions do you have? p.s. I'm 40 by the way, so maxing out super doesn't make sense for me.
Over two million worth of houses and 70k a year, and you're worried if you'll survive retirement? Where do you plan on holidaying, that six star hotel in Dubai?