Straw Poll: How much do you need to live on?

Hello All,

It's been a while since I visited here . . . but I'm baaacccckk, this time with a straw poll.

Retirement is a long way off for me, but I'm already thinking about how many IPs I should to buy and have paid off by then. (I have a buy-and-hold strategy.) How much money do you all think is a comfortable sum to live on? Yes, Yes - I know we'd all like ga-jillions of dollars per annum. But I'm talking reality here. Let's talk in today's dollars, gross annual amount, two adults, no debts.

I'm thinking $50K myself. What do you all reckon?

Thanks in advance,

Harriet

Heya Harriet

The current median income is about 46k- per person. Your income of 25k- per person- is about half that. As for me, I think I'd be content with double the median wage- whatever that is when I finish up work. This can occur if I buy a few more IP's, have them paid off in my 50's, and combine the rental income with my superannuation. I couldn't retire *now* on that amount, but I will be able to in some 25 years. I'm a tortoise in this regard.

Cat

Harriet,

I reckon you need to stop thinking about the amount you NEED to live on & start thinking about the amount you NEED to invest - live on whatever is left.

Many people have no idea how cheaply they can live while still living well.

Cheers,

Aceyducey

If I may just add a slightly different angle here.

When this topic is discussed most peolple want to be debt free on retirement. They expect to do this by selling some IP or stop buying quite a while earlier and slowly pay it down. I have never thought of being debt free ... dunno why, just never seemed like a goal worth achieving.

Our IP are in trusts and will be passed on to our children. Whe we are gone god knows what they'll do ... but they'll have the chance to continue the process ... of building wealth. I think I'm trying to say that things should continue as we had done, rather than go into debt reduction, or cashflow maximisation, or any other style which essentially isn't the way we think is best for the long term ... now or whenever.

Of course then there is Steve Navra's system in which again you don't have to be debt free. But then you'd be going to a different style of investment.

I see "retitrement" as having more free time but not essentially changing what we like doing now. Anyway told you it was a different perspective on the topic.

A couple can live well on $40 000 pa and still invest.

This doesn't mean living like church mice, but it does imply that consumption for the sake of consumption is challenged.

A couple can do the same things they do now but do some differently. For example, rather than stay in resorts in peak season and get resort 'entertainment', they can stay in a reasonable motels, apartments or cabins off season and dine out less.

They can choose to use their vehicle when required rather than for short often redundant, trips.

Food is much cheaper when all or part of the preparation is not outsourced. Equally, services like mobile phones are easily over-consumed, to our cost.

Group bus trips can be most entertaining and provide more frequent, cheaper travel.

If previous generations lived well by consuming less, then we can too.

Lplate

To my way of thinking, if I have to have delayed gratification now, then I want to be handsomely rewarded upon retirement. $100k a piece should be good enough for openers.

Acey, Lplate

I think Harriet is talking about a comfortable level of retirement income, not how much money she needs to live now. This is two different things, since I think retired people need higher level of income to be comfortable. When you are young it's easier to cut corners and go without and still live a good life. And if push comes to shove you can get a second job. But when you are old you might need things you might not even think about now, like home help and medical costs. And yes, it would be nice to splurge a little, too, and maybe stay in a nice resort every now and again.

Cheers
Nic

On our retirment plan, I've set our retirement income level is set at 70k per year. That's based on what we spend now and additional things we'd like to do in retirement. However, I have to admit that this is still theoretical, we may find out that it is too little or too much.

Cheers,

Hiya

A couple can live on 20 000 for sure. Most non self funded retirees do.

I used to work in direct sales in the "super" industry and the responses to this very question almost always was based on an assumption that one would need less money in retirement than they would now.

For our family, it works the other way, more time allows for more expenditure on things, experiences, more charities to give money and time to.

I side with brenda. 100 k a piece after taxes would be a reasonable target.

ta

rolf

Rolf Latham said:

A couple can live on 20 000 for sure. Most non self funded retirees do.

Click to expand...

Agreed and life can be surprisingly good. But their living standards would plummet if they (a) didn't own their own home, (b) had consumer debts and (c) needed to run two cars as there's no public transport or nothing is within walking distance.

Also seniors get generous concessions on things like fares, pharmaceuticals, show tickets, and rates, so $20k for a retired couple goes a bit further than a similar income for younger people.

I used to work in direct sales in the "super" industry and the responses to this very question almost always was based on an assumption that one would need less money in retirement than they would now.

Click to expand...

Agreed. A figure of 60% of final income required seemed to be common, though I've heard it said less recently. And that's to maintain a given living standard (no cuts).

For highly paid white collar workers (the only people who used to get super pre-SGL), this is heaps higher than 25% of AWE from the age pension but I still think the 60% assumption is suspect.

What areas could retirees cut back on? Certainly not housing. Maybe food, if people are not eating at canteens as much. Or they could sell the second car and reduce clothing expenditure (business clothes no longer being required)? These by themselves would not necessarily add up to 40% of expenditure.

Yes petrol/fares for commuting might go down, but whose to say that similar amounts won't be spent on holidays? Or canteens could be replaced by restaurant meals. And then there's all that time previously spent at work when you'd be earning money, not spending it.

So I'm with you Rolf, and want my investments to ultimately return a passive income that exceeds current job income and is approx double current expenditure.

Regards, Peter

I agree with Rolf and Brenda........espec with the "delayed gratification".

My partner and I are making sacrifices now...........that will pay off in the future. This isn't to say it's baked beans for dinner everynight.........but we don't go out too often, shop at the markets instead of the supermarket etc..etc... We were the last of our friends to own a DVD player........and ye gods still don't have home theatre (although I'd DEARLY love to have it).

I don't really want to retire, but we would like to be in a position where we worked 6 months (I still love my job) of the year and then spent the remainder of the year travelling. Since I don't normally travel in 1st world (read expensive) countries the level of income quoted above should be more than enough. Which means we will have choices. For me, investing is about having enough money coming in so I have freedom of choice in what I do year to year.

Finncial planners recommend $40k

I asked the same question of a good financial planner last month. Guideline is $40k for a couple, not much less for a single.

why not come form the other side?

Perhaps a better and more accurate way is to estimate based how much you'd WANT to spend (holidays, groceries, car, credit card, home upkeep, etc) then aim at that, plus say 25%.

That way you understand your spending better, and still have a buffer.

According to Paul Clitheroe $37,000 for just a moderatley comfortable lifestyle- yet only 4% have enough to achieve this level.

Personally, I want more than just "comfortable".

When Ii created my Financial independence Plan, I calculated $47K pa as a target (based on our budget and actual expenditure). Any more than that is cream on the cake; then I will go for the strawberries.

When I did my plan up in around 2000, I planned for $35,000 as a comfortble level based on being debt free (since learnt more about that).

I index that for CPI too, so at the moment, I think it's around $41,000 in today's dollars.

Since 2000, I've learnt more strategies around independance and such, and how $35,000 can be that or much more.

How?

$35,000 income, taxed is around $28,000 odd.
$35,000 capital spent, is untaxed, and is still $35,000.

So, nowadays, that's where I'm headed (slowly. Must stop spending money on toys!!!)


Of course, other parts of the plan have had a 'reality check'.

Like earning 12% from managed funds - or 20% from share trading.

In my defence, the former used to be very achievable, and I never had the time to do the second.....

Cheerio!

Simon.

Funny how we attach or look at the numbers like a trophy, I look at the time.
I don't want X $ to retire on (I don't want to retire, just not be dictated to or ruled by other peoples guidelines), for us to retire we need time.
Success is living life in your own way - this is so true of retirement, but it also pays to realise that it is not retirement that is the holy grail - life is.
Delayed gratification - sure and essential but my wife and I are part time right now. Will it delay our ultimate 'retirement' - of course as we are earning half our income.
But we just got back from a weeks camping, we are going skiing on Tuesday. These are memories that no one can take away, they are banked in our minds and are more valuable than any property.
I can't remember the saying but its the journey that is important, not the destination, and an old Indian saying - 'May all your goals, but one, come true'
Now to blow that all away, yes we think $100k pa is about right but we temper it with the above.

Early Retirement Risk Management

I was talking to a friend yesterday who for many years had an early retirement financial plan in place with his wife. Recently he was shocked to discover that she had another plan that coincided with his exit from work. So he is now sharing a group house and trying to get a job again.

You don't see this scenario in the 'retirement' calculators however it seems to be common if statistics are a guide.

You trust (he did) but ultimately I guess you must also over-estimate as part of your risk management.

The way I have approached it is I have I worked out what nett monthly income I want and to be living in my PPOR debt free. I then caluculated the total $ invested I would need based on 5% return which should not eat into the capital. My financial plan is based on this and will hopefully see me retire in 8-10 years if not sooner from a start 18 months ago.

Hence
$1000/week in todays dollars would require approx a gross income of approx $85K.

Therefore need approx $1,700,000 invested returning 5% plus my PPOR.

That means for me to retire I'll need about $2mill in todays $.

Better finish up here and get out there earning some $.

Later.

Hi guys, coming from people who are in business for the long term, your expectations for your efforts (after I suppose many years of delayed gratification) seem on the lean side.

We all have different plans and make different choices and whatever you plan for yourself should be Ok for you....however... a goal of retiring on $30k a year can only produce ... at best $30k a year.

I propose that you set your goal to retire on $300k a year, or rather $500k a year in order to maximise your potential and push yourself out of your confort zone. Think big and you achieve big. After all I am sure that if anyone would offer you a job for 30k you would probably not take it thinking it is too low pay.
For me retirement is simply doing only what I like to do, I have never thought of not working as a goal.
I enjoy the jorney, and in my journey I enjoy certain activities more than others. Usualy the more interesting activities happen to produce money. If that is work... well ... I will "retire" working