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?
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
Keep in mind once you move into retirement phase, your savings in super is tax free
Also remember that retirement phase means your money is not in an accumulation phase - ie no tax on earnings if it's in a pension account.
You can be retired and still have your super in an accumulation fund. ie retirement phase means something different to just being retired.
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.
maxing out super is the best thing you can do at any age, the earlier the better, the only downside is it locked up until retirement.
the tax benefits and future tax-free earning will far out weight any other investment you will ever make outside it.
why do you think they cap the contribution because people on high income would throw everything at it and benefit it greatly
they wouldn't invest outside super
yes go hard and go early. however it is something that's locked away for 30+ years so prioritise PPOR over super which has similarly generous tax concessions
there's always an option to withdraw super early if anything catastrophic happens
You pay 15% tax on anything that goes in pre tax, and nothing on the post tax. So roughly 25% benefit to loose control of what you do with your funds. I'm sure it's not the smartest strategy, but I contribute as little as possible to super. I'm very open to be convinced otherwise though. Are there some benefits I haven't considered?
I'll be 40 in a few days. I'm expecting at retirement my wife and I will have the equivalent of a fully paid off investment property worth about $750k atm + 1 house to live in worth about 1m atm, and about 800k in combined in Super (assuming I don't piss her off enough to leave me before then LOL). Why do you think I should focus on increasing that super balance instead of say paying off my mortgage and saving 6-7% rather than earning 2-3% in the super fund.
Why do you think super funds earn 2-3%? Last year most earned >15%
However, agree that most people should pay off non deductible debt ASAP (including PPOR) and then rapidly contribute to super. 'Financially' it may not necessarily be the best option depending on the assumptions you make as to future returns. However, a paid off house provides security and a contingency asset if things go bad plus having no debt provide greater comfort/flexibility.
If you are on the top tax rate, then super provides a 32% benefit (including medicare) during your working life and 0% tax post.
@dtc: if your income + concessional contributions take you over $250K, then you need to pay an extra 15% tax on contributions (called Division 293 tax), so still provides only 15% benefit. Goldilocks window is between $190K and $250K, where there's a 30% benefit.
@dtc: I started working full time in 2007, I thought the average (after deducting all fees etc) was closer to 2-3%. I think I may have accidentally included my insurance premiums in that though.
My variable mortgage rate is 7%. My super grew 9% in the last 12-months, excluding contributions. Any advisor would say you need to figure out how to make your money work the hardest. Hardly any will tell you to focus on super because that doesn't provide them with a revenue stream. If you're projecting $800K in super in 20 years time I'm assuming you'll be offloading your investment property? You need to pace youself to get the maximum benefit from the contribution cap. A couple retiring today can have up to $1,045,500 in assets and still receive a part pension.
@sumyungguy: Sorry not sure why you suggest offloading investment property. Could you elaborate
9% one year, but if you include the GFC etc, I don't think the average comes out to be anywhere near that high does it?
My 800k rough estimate was based off: current balance + 5% growth every year + 10% off wifes salary + mine each year + 5% growth on this every year for 25 years. I might have double counted somewhere so it might be slightly less.
@AG_ACT: Not right now but likely in the years ahead. I know several people who have offloaded their residential investment properties. When they eventually figure out their actual returns they realise they would have done better in ETFs without all the landlord issues. Those heading into their 50s realise they would have done better in super. But you may have an exceptionally low-maintenance, high growth property with a run of supremely civilised tenants. Also, you need $800K in today's money to live comfortably in retirement. If you're projecting $800K in 27 years that's just too low. ASFA says a 40 year old should have $168K now.
@sumyungguy: Tenants are ****heads. I bought in the ACT, so no chance of Capital growth either, and probably one of the worst returns because of land tax. I am however thinking that in 25 years, I will have paid it off, so the rent will be 1 source of income. Besides, attempting to get rid off it will cause me to realise a 125k loss right now, which I just can't afford to do…. lesson to be learnt, but yeah.
Re: the 800k might be too low, but that's still putting away 20k a year. If we only had 168k right now, we would need to put away 23k+ a year.
@AG_ACT: Credit to you for being so focussed on your future. At age 40 I was working too much and trying to raise my offspring and preserve my marriage.
@sumyungguy: But your mortgage is after tax so you will need to gross it up. it is more likely you are paying 10%
@netjock: If I make a $1000 super contribution pre-tax on a 23% tax rate, I end up 10% ahead inside super with investment earnings taxed at 15%. In my particular circumstances, my super balance now grows more per year than the value of my mortgage.
@sumyungguy: Why doesn't the bank come up with a product where you capitalise the interest and let you pay into your super and they collect at 65yo?
It is arbitrage but you're going from liquid to illiquid. Be careful thinking the tax concession are there for a reason to compensate you for the illiquid nature of super (it might take decades to get access to it).
tax benefit - apart from the initial contribution 15% (or 30% if you get slugged div 293) the gains within super are not taxed (which is offset by income tax if making concessional contributions to give you a net tax benefit)
anything you hold personally, shares or investment property you will need to pay at least 50% of your marginal rate on disposal after for CGT
average super returns last decade (of course not an indicator of future performance) has been 8-10%
your main risk in super is government intervention with changing goal post on age of access/total cap/concessional cap
@May4th: Not entirely true. During accumulation-phase gains are taxed at 15%. Gains on super are only tax free once you transfer your super to retirement-phase, of which you have a life-time transfer balance cap - currently $1.9m.
If you can structure your other investments appropriately and distribute gains accordingly then you can reduce tax on non-super investments.
You only lose control of what you invest insofar as you don't engage. You're not tied to whatever the default offering is your fund puts you in to.
Also, do the real sums on how your investment properly is performing - at some point, you may find the performance isn't as good as you think (considering baseline 7-8% you would be getting in super or some other investment). My first investment property (I had a half share) we bought for $400K, sold it after 20 years for $1.35m. Should have sold it much earlier when it was cash positive. Over the 20 years average return on investment was about 4.5%pa - well below average super returns. Still a good little nest-egg, but at 47 years old it makes more sense to make that money really work.
Putting money into super drives compounding - primarily because you can't mess with it. Compounding needs time to work, but it's magic so the earlier you can get money into super the better. If you're earning ~8%pa in super, this takes about 9 years to double, and then 9 years to double again, plus once you transfer to retirement it doesn't stop growing, but you no longer pay any tax on the investments within super.
You have to draw a minimum of 4% from your super when in retirement, but if you get your super balance high enough you'll be drawing down less than the growth rate - so you have enough money to live on forever… (keeping in mind the bank of mum & dad may come into play!).
@braddsey: Don't pop people's property dream.
I get these youtube ads and the guy says you need to get the right structures in place (trusts etc) then right tax advice then right location. I mean how much in fees are they going to cream off people.
Just the simple fact that you don't really need any licence or a degree to be involved in real estate investment advice.
We're really struggling to find marginal buyer willing to pay ever higher prices.
I overheard a call where the guy goes the $1.2m property is $200k under water not including stamp duty. Need rate cuts to get people interested in $1m+ properties (Melbourne). US Fed terminal rate is around 3% and RBA didn't go that high so we might come down to 3%, even at 2.5% mortgages are coming from 6% to 4.5% which is still far from the 2% in 2021 when property prices went up 20 - 30%
Incomes are going to have to go way up. Question is whether it can?
Yes. It does.
Max out super get to $500k. Cut back on work and cruise til 60 when you can access it.
Don't be stupid with your money.
question - lets just say inflation does blow up, unless you're holding your "70k income per year" in cash today and continue to do so, surely your 70k will be index as well right?
for you to be able to support an IP and having to pay it down in 20yrs, i can only assume its not a crappy small little unit so the income that it generates will be indexed as well, not to mention the property worth should also increase.
Yes.
OP is asking whether anyone doing it on $70k.
Problem is whether OP has got $70k right now. Assume the $700k investment property is paid off (it will be) and currently yield is $20k pa. OP has a $50k gap which would from super so what is the balance required to generate $50k (whether eating into capital or just dividends or dividends + capital growth realised) is a decision OP has to make.
It depends what inflation does to $70k p.a. in 20 years…..
Did you read the 75 other comments that said the same thing? And the OPs response?
75? man there must be a lot im not seeing
This is why super is invested with a reasonable amount (which depends on your risk profile) in growth assets so that you at least keep pace with inflation and ideally outperform it by a margin. Even with no risk, you can currently invest super in term deposits at around 5% (Australian super currently has 6 month TDs at 4.9% or 12 months at 4.8%) when inflation is running lower than that, therefore maintaining the value of the funds still in super.
If your planning to retire 20 years from now. You don't even know what you will be doing in next 5 years.
Stick to a 5 year plan and goals. 20 years is way too long. Will you get hit crossing the road, car accident, heart attack working for 20 more years.
You need to accelerate your savings and have shorter plans and revisit them.
I've been retired for 11 years and have an average spend of $62K per year over that time period. This is two of us, a dog or two, own our own home, OS holiday every other year, new car every 3 years, home improvements, hobbies and eat out once a month, Our income is actually more than this so we have continued to save and help other family members out financially too. So yes, it can be done.
OS holiday every other year
People these days need 2 holidays a year and $10k each minimum. (no joke)
In the first few years of retirement, we went every year but they become less appealing because are usually so structured and packed in with activities compared to normal retirement life that it becomes an actual effort to go on them.
You got a point.
There is also people who retire and think they need $100k to do all this stuff then realise they actually need to settle into a good routine.
No shortage of stories of people who have no idea what they are going to do and end up stressed out they have nothing to do and their health goes down hill.
I feel like this is one of this those tiktok riddles. In 20 years my son will be 23, how old is my son if I am 23 years old today.
I interpreted the question differently as I'm in a similar boat as the OP (If I'm correct, the OP could've phrased it simpler): OP is asking if retirees are doing OK - TODAY on $70K AUD per year & satisfying their needs for travel.
Age is the big thing with this, I'm watching my parents and they stopped doing the travel thing a long time ago. They don't spend much money (easily under $30-40K/year) & they have really low bills. With the money left over of the recommended $73K, you can afford big repairs / holidays once a year.
Most retirees I met get over travelling countries after a few years - so I reckon it's better to get frequent travelling out of you system closer to retirement if you can (whilst you're accumulating unnecessary cashflow). The BIG thing you need to cater for is what happens after all that & you can't take care of yourself anymore. It varies a lot, but in Sydney affluent suburbs it's minimum $400~$600K+ bond per person to get into a retirement home you like & handling the childcare-like daily cost to avoid putting a burden on your kids. (The bond feels like a scam - as you don't get interest, but in hindsight I'm guessing it's a security fund, so if you (or your kids) fail to pay the daily rates, they can deduct from the security until you die). Obviously there are government funded retirement homes, but the wait times of these will go up with aging population & if you're cashed up you might as well pick the one you like that's close to family. The bond will be refunded to your family at the end.
A few close-to-retirement colleagues are opting into working 3 days a week (or finding businesses willing to offer part time) -> this lets them ease into retirement whilst still maintaining an income buffer for retirement 'luxuries' / bucket list stuff (i.e. frequent travel, a new car every 5 years cos they've bought 2nd hand shitboxes all their life) until they get over materialism & get into a steady daily routine that reduces expenditure. IMO 70k is enough today after you've finished all the "I'm spending $$ now, because I sacrificed in the past to make it here" stuff.
(FYI All the smart knowledgeable older people at bunnings are probably retirees doing part time work to get out of the house & avoid boredom)
A few colleagues my age are setting up funds for their kids, but I tell them whilst it's easier to clearly delineate 'their' money and 'yours', it might be worth tracking that yourself & putting it in your super because the gains in super are taxed less for us normal people (i.e. those with less than $3m in their super). My idea is that the kids only need the funds when I retire, so I can access my super then.
I feel like the inflation from 2004-2024 (20 years) is doubled. A meal would cost $7 in 2004 and now $14 in 2024.
So, $70k in 2024 feels like $140k in 2004. Which means, in 2044, $70k would feel like $35k right now (year 2024).
For $35k annual lifestyle/expenses in 2024 with no debts for 1 person, in average your monthly spending will be $3000.
I would say you will live comfortably but not wealthy with $35k/year (2024) or $70k/year (2044 comparison).
For 2 x travel trips year, you will have a very limited budget. You are wealthy if you have $100k/person (in 2044) spending with no debts.
Depends on your proposed lifestyle. Once you reach an older age your priorities change.
My parents now don’t go on holiday (can’t walk as far now), only drive like 15km max (can’t see well), eat small and simple food (no fancy restaurants, small palette) and just like going on daily walks, buying stuff for grandkids and finding cheap bargains. They live on 25-30k a year
In 8 years we will all be retired, the Optimus bots will be in charge.
Is that Prime or?
Na the musk bot, also known as Tesla bot.
I'd rather Prime
Worse case scenario sell both of your properties and live on the streets. Holding millions of dollars in assets doesn't help when you're dead. Well sell the one you're living in to avoid tax. Retain the investment for your son. It's not the end of the world.
Look at this way, some people don't even own properties and they get by.
Being retired on $70k today is very do-able.
You and a partner can live comfortably in your paid off home, can pay bills, can eat out every now and then, Can go on a holiday each year, Can buy a new car every 5+ years. Ofcourse you will need to watch your spending and control your budget, but is still very doable for a comfy retirement.
In 20 years time….
Unfortunately i think $70k in 20 years time isn't going to go far. looking ONLY at inflation (and not how many things have surpassed inflation), $70k today is roughly like $40k back in 2004, it's not unrealistic to think that $70k will be like $120k in 20 years time. I don't think $70k will be able to get you much in 20 years, sure you will be fed, and you will pay your bills, but you may need to cut back on some luxuries like holidays, new car, going out frequency etc.
Other things to factor in:
One of the biggest thing people miss is how much life costs when you degrade, such as going to an old persons home or getting carers to come to your house….The costs here are crazy and would chew through $70k with ease.
FYI:
Goes without saying this is all my opinion, people on here are welcome to disagree with me, this is just the logic I'm using to approach my inevitable retirement.
We all need to run our own numbers. For some $73,337 is more than they live on now, for others it may be half their current spending level. The last person I was chatting with said they wanted to retire on $90K which needs considerably more super balance than ASFA comfortable.
Completely agree. Some people can live off tighter budgets than others
PPOR doesn't make money it just avoids cost of renting.
investment property worth $770k will be close to be paid off
Does this generate $70k currently? I'd suspect more like $20k.
You have a $50k gap.
If you take income only (assume 5%) you need to have $1m in super right now!
it makes you money if you downsize in the future- it's the most tax effective vehicle for creating wealth given the CGT exemptions. if you are well off it can be passed onto your kids tax free (if they sell within 2 years on inheritance) and if you are not you can sell up and downsize with a windfall in your bank account
Sell the IP and roll it into a new PPOR, then rely on super and sponge off the pension, just like all the other PPOR rich millionaires
how do the filthy rich get around the asset test in super?
Deemed income from $690K super balance (couple, ASFA comfortable) is $14,487 per annum, which is within part-age pension range. Pension cuts off if income exceeds $99,382. Income below $9,672 qualifies for full age pension
asset test, not income, for couple home owner is $470,000, and part pension is a bit over a mil. not hard to reach if you have worked for 40 years between two of you
70k/year ? I would retire in one of those South East Asia countries and live like a king 😁