You are assuming the 800K isn't earning income.
Invested at even 3.5% in a bank,
you would get 28K a year interest, ( with little tax )
so only need to draw down 22K on capital, not 50.
With part of it invested in shares that have capital growth
and moderate dividends, you will also get a much longer timespan
before its gone.
Inflation is the unknown here.
I've been told that $800K is plenty for retirement at 55.
Using my simple maths, That much cash would only last about 15 years at 50K/year. Am I missing something?
$800k is a good ball park for $45k a year. As Andrew said if you have the capital invested you can make it last a little longer. The problem is that self funded or not you'll probably will have to wait until you're 67 or older before you can access that money. Back home they pushed it to 72 which is a freakin' joke. If you retire at 55 I'm not sure how it works but I'd say you'd be slashed by taxes assuming you work out how to get the money. There are some exceptions to cash in earlier some as extreme hardship or terminal disease, etc... But $800k sounds confy. For now... by then who knows.
It really depends on your spending habits and other assets, do you own your house, cars etc outright? Have you done all the overseas travel you ever wanted to do?
Your lifestyle ......... restaurants, raging all night, smoker/drinker?? Are you prepared to downsize that big mansion or move to a cheaper area (cheaper areas are usually also the ones that have dark skies !!!)
I think the amount needed is over estimated because the superfunds and government don't want you to retire!!!
It is a widely accepted fact that astrophotographers need to work 5 years longer than visual astronomers to maintain their living standard!
I have examined this problem in relation to my own superanuation problem to return an inflation proofed (indexed) pension in perpetuity.
This also depends on owning your own home. The current valuation I give my "pension" ie the amount I would need to have with investments and property as $1.35m dollars to maintain my life style.
@Matt: How do you retire at 55? Can you cash in any kind of pension money. I always assumed early retirment would mean personal asset to bridge the gap before you are entitled to withdrawal. Interested to hear.
In my case I had several super accts running for up to 30yrs, I cashed a couple in for play money and converted the rest into an indexed pension. Besides I like baked beans !
The only stipulation is that I can now only be gainfully employed for 10hrs a week, but I have found that working is actually over rated, so I have spent the first 15 weeks of my retirement skiing, much more fun !!!!
My astronomy is being funded by ebay ...... I am selling off expensive junk that I have gathered over the last 30 years.
It is all about priorities and choices for us ordinary folks.
For example: this is being sold to fund an observatory/mount and TSA120
Remember also that you don't need the same amount of money, I am now able to sell off 2 cars, I don't drive 40,000 klms a year to my job in Canberra, I don't need the tools, workwear, the take away foods, $5 cups of coffee etc. I am saving $9000 a year just on petrol bills and vehicle expenses.
You cannot put a $ figure as a rule, each person's $ requirement is different. You really only have to get to age 75 with most of your spending, after that a good book and a bowl of soup will keep you happy for hours!
That's the great sadness Graham, - most people will be well under-funded. And the government is set to hand out ever decreasing amounts. It's so important to try and set yourself up when you're younger and are more able.
That's the great sadness Graham, - most people will be well under-funded. And the government is set to hand out ever decreasing amounts. It's so important to try and set yourself up when you're younger and are more able.
Its quite dramatic, too, how great the effect of divorce is. You can put away adequate money for retirement whilst married, but so many marriages end in divorce and neither partner really ends up with enough money.
Yes theres sure a lot of things that can skittle our plans for retirement . Divorce, serious injury ,death another ,the first one you can scramble out of in time the other two, probably not , from experiance
When calculating an investment for a retirement income the safest way is to look at what you require to live on comfortably eg $30000 per year today. This amount will class you as a low income earner with no tax to pay. $30000 tax free is a lot of money if you don't have a mortgage or children to support and are happy to drive a Fiesta instead of a SUV.
Calculate how much you will need to invest at about 2.5% to return this amount (about $1200000). The difference between what you get as a dividend and this figure will be the CPI that must be reinvested to keep your earnings indexed.
Barry
Last edited by Barrykgerdes; 07-10-2012 at 08:21 AM.
I'm sure heading for trouble then.
