Sustainable Retirement

[marcodepaul]

On another thread MC98 made the assertion that it was greedy to accumulate too much property in order to provide an income stream. His posting raises a couple of interesting points.

How much does someone really need to comfortably retire on? What is your magic figure p.a.?

 

[The Y-man]

I would suggest most could retire reasonably comfortably on $60k pa. By this I mean have a roof over your head, eat quite well, and have the basic necessities and the odd luxuries of life.

However, there is a difference between living comfortably, and having the power to grow your life.

When I hear people speak of "greed", I believe they see the world from the viewpoint of "scarcity". In other words, their view of the world is of limited resources, and that one person taking a lot will mean less for others.

My own view of the world is from that of "abundance". I believe there is more than enough to go around - however resource is required to distribute what is available.

This comes back to your purpose in life - what you are out to achieve. If what you want to achieve in life is sitting atop a mountain meditating, then I agree, you do not need much material posessions, nor instruments of wealth. However, this is not the vision for all people. Some people wish to be able to do more for others, be it family, friends, relatives or total strangers. I would suggest that for these people, they will need more resources than those with "smaller" ambitions.

I must stress that I find there is nothing wrong with how big or small your ambitions and visions are - they are yours.

Suppose you went forth, and bought all those properties - hundreds of them. Are you being greedy? I would suggest you are providing not only accomodation, but busines and livelihood for a great number of people - property managers, tradies, gardeners, builders..... who will then spend there earnings on other business etc etc. I find nothing profoundly wrong with this.

Suppose you got extremely wealthy from your ventures, and decided to build an monumental compound of a house - again, is this greedy? How many people did you need to employ to make this dream of yours a reality? Architects, builders, council people (oooh... )....

Perhaps what IS wrong is where people deliberately limit themselves from realising their own potential. If you CAN own hundreds of properties, or run a huge business, and have millions in income, perhaps it is wrong to NOT achieve the full potential in life you were born with.

Cheers,

The Y-man

 

[Brinkdude]

The Association of Superanuation Funds of Australia (ASFA) provides a regular report on what they beleive people need to retire on. It is a lot lower than people on this forum (me included) aspire to achieve. The full report is here and includes a weekly shopping list.

http://www.superannuation.asn.au/RS/default.aspx

Westpac-ASFA Retirement Standard MARCH 2007

Detailed Budget Breakdowns: Comfortable Lifestyle and Modest Lifestyle

Comfortable couple . Modest Couple

....... $47,766 ......... $25,780

 

[BoatBoy]

I was working on $50,000 per year with a 2% increase yearly and a $7500 "Bonus" for unforseen expenses every 5 year's if required.

Of course if not required it would stay in the mix.

Off to Malysia in a week, so if we like it, we'll live much cheaper again.

A peice taken from this site on a couple cruising S/E Asia on a converted fishing boat

http://cruisingunderpower.fastmail.net/


Q: You wrote of your living costs while in Queensland, did you find great differences in expenses living aboard in Indonesia and Thailand? It is apparent there was some change of lifestyle, e.g. eating out more, catching less fish.


In Queensland we lived a comfortable life on a budget of just under $A25,000/year. In Indonesia costs were next to nothing east of Lombok (not much to spend money on) and not much after that. Since we have been in Thailand over a year (2006/07) where we have access to western conveniences and products, we live much more lavishly on the same budget as Australia or less. We can now afford eating out every day, having our laundry washed and ironed, fresh orchids on the table weekly, paying to have our hair cut, lots of land and air travel, hiring cars and so on. (And best of all, this time on the slip at Satun in southern Thailand, we stayed in a hotel and paid others to work on the boat).

Sound's good to me.


BB

 

[marcodepaul]

Thanks Brinkdude- just what I was looking for.

 

[Dazz]

Perhaps what IS wrong is where people deliberately limit themselves from realising their own potential. If you CAN own hundreds of properties, or run a huge business, and have millions in income, perhaps it is wrong to NOT achieve the full potential in life you were born with.

Excellent !!! Accumulate what your abilities will allow. Fantastic post Y-man.

 

[Simon]

How can there even be a right or a wrong?

Accumulate what you like - it is perfectly legal. Those who might put you down are really reflecting on their own self imposed status.

How could it be wrong to set yourself up as more comfortable than average? No one is going to admire you more for deliberately building a less than average asset base and relying on social security to get by.

What a pointless question it is that started this thread.

I believe that the major obligation you have is to yourself and your family. What people think of you comes pretty low on my list.

 

[keithj]

3-tiered approach

On another thread MC98 made the assertion that it was greedy to accumulate too much property in order to provide an income stream. His posting raises a couple of interesting points.

How much does someone really need to comfortably retire on? What is your magic figure p.a.?

I choose to use a 3-tiered approach to retirement.

Tier 1 - living essentials
My budget says I need (say) $50Kpa for absolutely necessary living expenses - food, petrol, rates, clothes etc. So I have low risk investments that provide enough passive income to cover those outgoings. If ALL my tenants stop paying rent for a year or so and the sharemarket heavyweights stop paying dividends for a couple of years & everything else going pear shaped, then I'll be stuck with the $50K for that 'bad' year. I believe that the chances of that happening are slim.

Tier 2 - comfortable retiement
It's nice to have (say) $100Kpa available for non-essentials - eg new cars now and again, o/s hols, school fees, etc. Diversified investments - dividends, LPT distributions, rents provide this.

Tier 3 - $1M+pa
If I need more (eg for new beach house or more expensive PPOR), I use LOE if it's available.


I consder this a v. low risk retirement strategy - the living essentials are guaranteed, the nice stuff is v. likely to be achievable, and the luxuries are there if growth happens.

The 3rd tier will be the one to provide the huge returns, the problem is waiting for that exponential growth to occur. The first 2 tiers are expected to provide a 'comfortable retirement' until then.

 

[JIT]

Immediate Retirement...

Off to Malysia in a week, so if we like it, we'll live much cheaper again.

Has anyone here considered retiring to an offshore tax haven or even a less developed country where the cost of living is much lower (and has favourable currency exchange rates)?

There are of course disadvantages to this, eg. standards of health care and education may be very different to Australia and also, your family and friends can't come with you!

I'm sure you could find places though where you can get good health care and education, so the main thing is losing immediate touch with your close ones.

If retiring to a developing country location, many here could probably retire today...

Was in Buenos Aires, Argentina, recently - great city, pretty developed, like a European city, but incredibly cheap after their political/economic chaos of several years back - not so good for the locals though.

GSJ

 

[JIT]

Tier 2 - comfortable retiement
It's nice to have (say) $100Kpa available for non-essentials - eg new cars now and again, o/s hols, school fees, etc. Diversified investments - dividends, LPT distributions, rents provide this.

I like your 3 tier approach, but school fees, I'd probaby put in Tier 1! - though the kids might not argue with that one.

GSJ

 

[JIT]

Q: You wrote of your living costs while in Queensland, did you find great differences in expenses living aboard in Indonesia and Thailand? It is apparent there was some change of lifestyle, e.g. eating out more, catching less fish.


In Queensland we lived a comfortable life on a budget of just under $A25,000/year. In Indonesia costs were next to nothing east of Lombok (not much to spend money on) and not much after that. Since we have been in Thailand over a year (2006/07) where we have access to western conveniences and products, we live much more lavishly on the same budget as Australia or less. We can now afford eating out every day, having our laundry washed and ironed, fresh orchids on the table weekly, paying to have our hair cut, lots of land and air travel, hiring cars and so on. (And best of all, this time on the slip at Satun in southern Thailand, we stayed in a hotel and paid others to work on the boat).

Sound's good to me.


BB

Oops, I completely missed your post in blue!

GSJ

 

[gerd.]

http://www.news.com.au/couriermail/story/0,23739,21802088-5003417,00.html

 

[sailor]

According to http://www.news.com.au/couriermail/story/0,23739,21802088-5003417,00.html one only needs:

"Nationally, a comfortable lifestyle in retirement will cost a couple $918 a week or $47,766 a year if they plan to retire at 65.

A modest lifestyle in retirement will require $595 a week or $25,780 annually, the study says. It's slightly more in Brisbane, where it will cost $48,062 a year for a comfortable couple or $26,013 for a modest couple.

A single person will still need to accumulate more than a quarter of a million dollars before hanging up their work boots to sustain a modest retirement. A couple hoping for a comfortable retirement will need to save closer to $630,708."

 

[Michael Croft]

If you haven't read it "Your Money or Your Life" will offer a very different perspective on this question. The authors (American) can live "comfortably" on roughly 25% of the figure that the US Life Co's suggest as modest. So in Oz this would be $12,000 p.a.!

The book also offers an interesting take on inflation and the cost of goods.

MC

 

[MarkB]

Accumulate what your abilities will allow.

Yes.

Imagine if Bill Gates or Warren Buffet had determined that mediocrity was a perfectly acceptable strategy?

$33+ billion US dollars (and growing) committed to medical research, poverty reduction, and literacy programs (care of the Bill and Melinda Gates Foundation, of which Warren Buffet is also a major contributor).

And yet some people still think that wealth creation is bad?!

M

 

[Michael Croft]

Unfortunately top down philanthropy is the exception and not the rule. Just imagine if all wealthy individuals led by example and tithed or gave as generously? The mentality of "I create jobs and therefore am doing my bit" is self serving and common.

Gates and Buffett are often trotted out as shining examples (which they are) of how the system works. The truth is the system sometimes works despite it's built in limitations and inefficiencies.

Wealth creation is not bad, just inequitable.

MC

 

[MarkB]

Unfortunately top down philanthropy is the exception and not the rule.

I think more so in Australia.

Perhaps less so elsewhere, as I am told that in the US philanthropy is a BIG thing and that lists are published celebrating major donors, etc.

Just imagine if all wealthy individuals led by example and tithed or gave as generously?

Maybe we need those US-type lists?

Or more leadership from Governments - perhaps dollar for dollar?

Wealth creation is not bad, just inequitable.

Yeah, but what is the alternative?

M

 

[Michael Croft]

Governments could do more with the tax system, skewing the playing field in the direction of philanthropy, with a greater than 100% deductibility.

The alternative could be anything that closes the gap. Does the head of any bank need to paid $33m p.a.? Does he or she need $3m per annum? And $300,000 per annum?

It's a systemic problem of gargantuan proportions, which is why, collectively, we fiddle with at the margins.

MC

 

[MarkB]

I thought we were talking about wealth creation and an individuals right to engage in it - which is a different question to whether Alan Moss is worth $33m pa, but I'll run with your income example.

You mentioned needs, which is a very dangerous argument imho.

"From each according to their ability, to each according to their need."

That's a communist maxim (no I am not implying anything) and pure socialism. And we both know how well that system of government has worked in trying to harness human behaviour which, sad as it may be, always seems to work best with private initiative.

But whether Alan Moss is actually worth $33m pa is not for me to say.

I'm not a shareholder in Macquarie Bank so he doesn't work for me.

But from an economic point of view (marginal product of labour approach), if he adds more than $33m pa in value to that organisation, then he is worth every dollar.

M

 

[Michael Croft]

The fact that the socialist model has failed due to poor application of the principles, doesn't discredit the ideals. To apply Thomas Edison to the problem "we have discovered x number of times how not to apply socialism." And before we too far off track 60 years ago in China, 1 in 3 children starved to death and it was truly a capitalist free for all at the time.

I am not advocating a socialist utopia, but a bit of counterbalance is required for the greed and avarice that seems to dominate the globe.

Anyway a persons 'right' to engage in any socially acceptable activity, comes with social 'responsibilities'. One of those responsibilities for an Australian was a commitment to a fair, free and equitable society. It is hard to see equity and fairness in one employee of a company earning 1,000 times more than another. Do we really believe that individual is worth a thousand times more than the counter staff? It's not my Australia if we do.

MC