Thread: Retirement Funding - How much $ is enough?

At 40 I realised there would be no aged pension and my other super funds were only in the 10's of thousands. I started sacrificing $100 per fortnight on top of the mandated Super Guarantee my employer pays and still found it too paltry a sum to get anywhere near a decent balance.

Now 10 years later I sacrifice 14% of my pre-tax salary (and have done for some years) and now have 100s of thousands in the account but will still need to work till 60 to have a decent retirement income.

The good thing is that the interest now adds as much or more than I do myself.

The better thing would have been to sacrifice at least 10% pre-tax while I was still in my 20s.

When working with junior staff and new graduates it is something I always stress to them. Plan for your retirement now you won't miss the deductions when young but will be glad when planning to retire. Unfortunately it often falls on deaf ears.

Diana

How much do I need to retire? This is the question all Advisors get asked and the answer they should give you is "how much do you need to retire"

Bit obvious I know but everyones wants and needs are different. We intend to retire in 3 years at my age 57, although our advisor would like us to go to 60 (of course he would), and have been working towards this for 10 years. I know of people who live on $25000 a year and are very happy and comfortable, but many people never have a large income when they are working, so a small retirement income is not a worry.

BTW according to our advisor the ratio of lump sum to pension that is most commonly used is the rule of 15. That is whatever you deem to be your retirement income, multiply that by 15 and that is the lump sum required. eg if you want $40000 then you will need a lump sum of $600000.

My advice to anyone considering retirement in 10 to 20 years.....start planning.

thank you all for your input - it's really good to have a range of honest viewpoints and particularly I would like to thank those who offered thoughts on actual amounts and ratios of fund balance to pension

also valuable comments from barryj and John about managing expenditure and unplanned/unexpected major costs

One important point coming thru is that it truly is so hard to define for a particular individual. Speaking to others who were formerly self-employed but now retirees, I find this common thread (how much $ is needed?), and then when they look into their details - mostly they fortunately find that they are better off than they thought.

I guess that we very fortunate too, to live in such a wealthy country that, if all else fails, pays all of part of an age pension if we really need it (age pension now available at least in part for those retirees with notional incomes less than $80k I think)

I also think that we are fortunate having such choice for self funded retirees from self managed funds where we decide our own pension pays to being able to hand it on to a fund manager if self-managing is not our thing.

I know the generosity of sfund conditions has been a govt strategy to encourage people to make provision for their retirement and I see that it is paying off.

I guess we'll all have our own views about funds and their managers and I suppose the main reason that my partner and I manage our own is the same one that makes me do my own oil changes - I then KNOW that its done (independent streak? )

Thanks again to all respondents

Originally Posted by weeds

age pension....my financial planner/advisor has indicated i will never see it

I think this is a bit of a financial planner furphy. I was told this at age 21 which was a fair while ago. Aged people will have a majority vote in a few years time, if not now, so the Government will have to look after them.

It really depends what you want to do in retirement.

My Father-In-law retired from the Railways about 20 odd years ago with very little super and owning one house. He has six grown up children and a few Grand kids. He has never wanted for anything and holidays a few times a year with his free rail travel.

His wife died a couple of years ago and since then has sold the house and is living very happily in a retirement village with a couple hundred thousand invested and he still gets the pension.

My Dad is the other way. He retired 20 years ago and had little assets apart from his house. Since then his Mother died and left him a house and 60% of assets which including about $600,000 cash and the family farm.

Now he does not get the pension owing to too much in assets but he has invested the cash and gets enough to live off from that and a very small rent on the second house.

If you are over 60 and have all debts paid off (including kids now at work) then you can survive on a lot less but it depends what lifestyle you want to lead. For a few years before retiring I prepared a spreadsheet of all my income and expenditure and from that I know, subject to changes in life style, what I needed to live comfortably. There are various sites which offer planning tools such as http://www.fido.asic.gov.au/fido/fido.nsf
http://www.aboutseniors.com.au/index.php
http://www.ato.gov.au/default.asp'menu=63
http://www.nationalseniors.com.au/
which will help you to plan and the difference between the different types of pensions. If you are only getting a return of 7% that is low, most companies work on 8% over many years to allow for the rises and falls that occur and at the moment reliable investment companies are returning 14% and higher in dividends,
Use some of the spreadsheets and their returns then play around with them allowing for large one off expenses for say a long holiday, operation and also add in what you could get in a government pension as while the money may not be much after allowing for your allocated pension, the Pension Card (or even Seniors Card if you are not yet 65) saves you money on many govenment items eg car rego,

It sounds that you might need to change your financial advisor and get one who specialises in retirement.

The advice I had when starting planning (in my 20's - self-employed at the time) was that I should plan to have $1 Million+ at retirement. I'd think that Brian's suggestion of $500,000 currently wouldn't be too far out. You need to factor in that using all your capital to live on is a bad idea, and a worse idea the longer you live. I have plenty of patients in their 90's. If you retire at 50, you might well spend 1/2 your life retired. That takes a lot of capital!

My advice to people is to instill a sense of gratitude in their children - I figure there'll be precious little money in the Government coffers by the time I retire. You want someone to look after you.