What income from investments do you need for financial freedom?

[WinstonWolfe]

most people have little ability to imagine what life is like when they are older. as you age, you are capable of doing less. (though I presume many aim to retire before they get old)

nevertheless, studies that have explored a comfortable cost of living for people over 65 consistently show the amount required is a lot less than most imagine. this obviously accounts for children and work differences.

as you age, you don't have the same desire or capacity to do as much away from home. your lifestyle costs diminish and your health care costs go up.

tours of Antarctica, Macchu Pichu, Aix en Provence, shopping sprees in Hong Kong and Saudi, doing the Kokoda trail, or a cooking course in rural Vietnam or Cambodia, are less enticing when you have grade 3 osteoarthritis in the knees and hips.

fancy restaurants, multiple short blacks, and a bottle of Penfolds Hermitage aren't as enjoyable when your digestive tract can only tolerate (and your BP and cholesterol dictate) steamed vege, lentils, and a glass of soy milk.

sports cars aren't fun when your vision, hearing, and reflexes are impaired.

3 rounds of golf every week isn't possible once you've torn your rotator cuff, have a permanently herniated lumbar disc or minced meniscus.

keep in mind there's some things money can't buy......and health is at the top of the list.

 

[devo76]

most people have little ability to imagine what life is like when they are older. as you age, you are capable of doing less. (though I presume many aim to retire before they get old)

nevertheless, studies that have explored a comfortable cost of living for people over 65 consistently show the amount required is a lot less than most imagine. this obviously accounts for children and work differences.

as you age, you don't have the same desire or capacity to do as much away from home. your lifestyle costs diminish and your health care costs go up.

tours of Antarctica, Macchu Pichu, Aix en Provence, shopping sprees in Hong Kong and Saudi, doing the Kokoda trail, or a cooking course in rural Vietnam or Cambodia, are less enticing when you have grade 3 osteoarthritis in the knees and hips.

fancy restaurants, multiple short blacks, and a bottle of Penfolds Hermitage aren't as enjoyable when your digestive tract can only tolerate (and your BP and cholesterol dictate) steamed vege, lentils, and a glass of soy milk.

sports cars aren't fun when your vision, hearing, and reflexes are impaired.

3 rounds of golf every week isn't possible once you've torn your rotator cuff, have a permanently herniated lumbar disc or minced meniscus.

keep in mind there's some things money can't buy......and health is at the top of the list.

After reading that i think ill go neck up now and save myself the misery

 

[WinstonWolfe]

After reading that i think ill go neck up now and save myself the misery

not all is lost.....many leave the mulah for their spoilt and good for nothing kids, who blow it on the stuff you avoided to make the money in the first place.

 

[Kristine..]

As in something that floats...boat...houseboat..??
Or a ppor that has a balcony you can fish off..??
Or an acreage property with a river going through..??


See ya's.

Well, we do have the house with the beach at the end of the street

Wouldn't mind a Beach Box - there is a gaggle of Boxes where we come on to the sand

By the time we do the knock down rebuild of the house we are going to be looking at the equivalent of four green houses equals one red beach house!

However, the question of the thread was about 'need' - what income from investments do you need for financial freedom.

and to live financially independently we would need about $50,000 from investments.

Squillions of dollars more is just spending, or hoarding, or whatever.

$50,000 per annum would satisfy the need and the rest, fantasmagorical though it may be to imagine all this stuff, is just about stuff.

I think my knees may hold me up long enough to get down the street and back each day, and if not, I can just sit in the house and look at the water anyway.

cheers
Kristine

 

[quoll]

I know my views have changed over the last 10 years, I used to want the flash $200k car, flash house, large disposable income.

Now I've toned down my expectations a bit and really thought about what do I want to do? What makes me happy?

Try and balance the save for the future vs spend and enjoy now.

We are all different and will want different things but I really do think you need to look at your expenses and work out how much do I need to live a nice lifestyle, how long will it take to get there, VS how much do I need to live my wildest dreams and how long will it take to get there. If you view a few different scenarios then you can make an informed decission that factors risk / time / reward / lost opportunity.

An example is when you have kids, spending time with them is important, so you don't want to be working 12 hour days 7 days a week for the first 5 years of their life and miss out on that TIME, doesn't matter how much cash you have you can never get that TIME back! I look at some activities and think these are physical you need to be young / fit therefore I will need to do these soon, where as I could easily drive around in 20 years (baring unforseen mishaps) in a flash car.

Saying all that I still think for me / my family the $100k mark is about it, all our debt is business / IP related, As long as the investments pay for the interest and upkeep and we get $100k to spend on average.

I'm happy driving around in the daul cab ute, holidays in OZ with caravan, as long as I can aford good food and wine, don't mind shopping at Target.

I think it all ties into the overall plan so you know where you are, where you are going and how to get there, you have worked out what you want to do and then worked out how much it will cost. I think those that just look at where they are now and go "we're on $50k gee how good would it be on $200k" with out thinking about what lifestyle they would like, what activities they want to do.

Cheers
Graeme

 

[Sunfish]

Not for the first time, I see things differently than most here. Living like a pauper for decades building up a portfolio of properties to enjoy wealth in your dotage just doesn't make sense.

And having a portfolio of properties is "work" anyway. If you contract a PM to do it all and live of the meagre net return, your PM is going to retire before you do.

I would advise someone younger I cared about to aim for self-sufficiency in the desired lifestyle (ie own the house you like, a car, golf clubs and something to sit in when fishing.... whatever) and a war chest with the cash you need to finance the things you have been putting off till retirement. A quarter mill would suit someone retiring in their 60s because at that age you quickly tire of la dolce vita.

After that the 30 - 50k p/a would keep a contented person happy. I have no son/daughters in law or grand kids so that's a big saving at christmas .

 

[fokas]

I'm aiming for $500kpa after tax income in todays dollars.
That way even if I'm off it by 10% I will still be happy as larry.

 

[Sunfish]

Let's see: $500k after tax. That's a mill gross from property. Net of all expenses, residential prop may return 2.5 to 3% pa. so that's $40 mill of res property, all paid off.

If you plan to live like a Saudi Prince once you retire then you must work up to that standard while still working .........

Nah! You're joshing!

 

[steveadl]

Not for the first time, I see things differently than most here. Living like a pauper for decades building up a portfolio of properties to enjoy wealth in your dotage just doesn't make sense.

Not the first time it's been assumed that one needs to live the life of a pauper along the way either.

 

[Jonathon]

Winston's post hit the nail on the head, once you retire you really don't need that much.

Recently I was having lunch with a few accountants who each earn over $500k pa at present. I asked them the question about how much they want to have as a retirement pool.

We all agreed that 5% is a valid measure of the return to expect. I expected them to talk of $5m to $10m as a retirement goal, thus yielding $250k to $500k pa. However they each thought that $2m to $4m would suffice, for exactly the reasons that Winston pointed out - what on earth are you going to spend $500k pa on when you're retired? (Assuming of course that you own your PPOR)

Of course as accountants none of these guys are frivolous spenders, certainly none of them drive flashy cars and they have reasonably normal PPORs, so perhaps they don't have the spending desires of others?

Cheers
Jonathon

 

[fokas]

AAAA ..... ,,,, add as needed

Ha! I can't believe I read through your whole post to get to this.

But I agree with what you're saying. Basic fundamental in goal setting and achievement.

 

[fokas]

Let's see: $500k after tax. That's a mill gross from property. Net of all expenses, residential prop may return 2.5 to 3% pa. so that's $40 mill of res property, all paid off.

If you plan to live like a Saudi Prince once you retire then you must work up to that standard while still working .........

Nah! You're joshing!

What's the cliched saying....aim for the moon because even if you miss you'll still end up amongst the stars?
I haven't been burnt yet so I'm going to continue my 'joshing'.

 

[Dazz]

Well done Sunfish for bringing some rationality back into the thread. Of course that's fully paid off in today's dollars. If most people are only a couple of % points along to that track, well, you know the drill.

1M p.a. My absolute minimum too!

That sounds great. Couple of questions if I may ;

1. How much in the assets you own will it take to make that amount ??

2. How many decades will it take to achieve ??

3. What will happen when you are 10% of the way down that track and you have the opportunity to be free of all constraints. Will your absolute minimum be reviewed ??


I found as I trod the path, that once the absolute minimum was achieved, you question yourself every day as to "Hell - why not now".


I don't think respondents to this poll are placing enough emphasis on the sacrifices necessary.....especially time away from family....to put in place the infrastructure necessary for all of this passive income.


The poll results should be a bell curve - regardless of the population surveyed. The result has been skewed by the "big Kahuna" tag line.....a statistician would laugh at the bias involved.


IMO it's turned it into a dreamy wishlist, not a "need for financial freedom".


Good posts Kristine, you've obviously trodden this path as well.

 

[keithj]

I found as I trod the path, that once the absolute minimum was achieved, you question yourself every day as to "Hell - why not now".

Precisely. Time is the most valuable thing in the world, not the ability to consume doodads.

To answer HiEqs question..... How much is enough ?

For me the answer is...

A reasonably secure passive income that covers all essential expenses & a little extra, that is v. likely to increase faster than inflation as the years pass then that is enough for me.

 

[battler]

A reasonably secure passive income that covers all essential expenses & a little extra, that is v. likely to increase faster than inflation as the years pass then that is enough for me.

And is usually achievable in less time, giving you more retirement time.

 

[WinstonWolfe]

From the responses so far, it seems everyone thinks they'll never need a retirement village or nursing home.

So maybe everyone thinks their children are going to be living next door and have the time and energy to get you out of bed, wash and dry you, put you in your wheelchair, get your meals, clean your house, do your laundry, track your meds, and take you off to doctor's visits and outings in the park.

Or maybe you think the Fed govt is going to have the tax revenue to provide a nice villa or room with a view of the ocean, and a 25 year old blonde personal carer to do the above.

Private health insurance premiums for over 50s are going to be very interesting over the next 30 years......as are Rudd's medicare levies and surcharge plans.

 

[The_Bludger]

Personally, I live the lifestyle I dream of today and the rest(investments) seem to work themselves out over time. I don't have an exact figure in mind, nor am I working towards one. My investments, plus superannuation will give me enough to play with when I retire....

I'm sure of it.

 

[VYBerlinaV8]

A reasonably secure passive income that covers all essential expenses & a little extra, that is v. likely to increase faster than inflation as the years pass then that is enough for me.

My aim has always been to live only off the yield component, thus allowing the asset base to grow over time, meaning I should get increasing income over time.

I stand by my target of $150k per year in 2005 dollar terms, partly because my wife and I earn over double that now, and for us I think it is an achievable number. I figure that $150k per year requires $3M in assets (5% average yield), meaning that by 2023 or so, I'll need about $4.6M, assuming inflation averages about 3%pa between now and then. I think this is achievable, given my income and the amount I can realistically put inot investments.

 

[Kristine..]

From the responses so far, it seems everyone thinks they'll never need a retirement village or nursing home. .

On the contrary, Winston, having nursed my 59 year old Sister-in-law last year unti her death, I saw at first hand what her savings provided her with.

The ability to have someone there at night, to provide active care for her during the day, to be able to have a choice.

The National Health offered her care but at their premises. As she wanted to be at home, she had to pay for the care to come to her.

Granted, her care was for months, not years, but my Mother was in care for seven years and it was the house which provided that care for her, the mortgage paid off over 30 years, the greatest asset - apart from time - was the clinker brick post-war house in the suburbs.

What good is oodles of money when your mind has gone?

However, having said that, inheritance tastes of dust. My 'need' is to be financially independent, and I have achieved that. My children will also be independent financially and when they come to see me, it will be because they actually want to, rather than because of duty or to curry favour to protect their inheritance.

Our house by the Bay is so that we all share and enjoy their inheritance while we are all alive to enjoy it together. Family life goes in cycles. We were busy when the children were small and provided them with lots of love, a safe house, plenty to eat, a 'good' educations, clothes to wear and medical care when needed. They are now grown and flown the coup, but they will be back and it is the second stage, where there will again be small children to dig holes in the sand and to marvel at crabs in the rock pools that we look forward to.

Yes, health is the most important thing, but it does take money to protect that health. Good food, adequate heating, and a safe place to live.

Our cat has required antibiotics over the last two weeks - $98 one week and $58 the next week, with a further two x $58 to come.

Without money, we would have had to kill the cat. Cheap at $45 once and that's it.

If we want to live a life of relative ease - and the word is relative - then we must have money to do so. The butcher, the baker and the candlestick maker all require payment.

At the end of the day, there will be money for the dignity of nursing care and the cheque for the funeral parlour. Chipboard is fine with me, and I don't want my children having to not eat to pay for the funeral.

But in the time allowed to me between now and then, I have paid my dues and intend to enjoy the fruits of my labour. That enjoyment, for me, will be strolls along the sand and the Tuesday Roast at the local RSL. We cunningly bought the house opposite the Senior Citizens Club so won't have far to walk for a bit of company.

However, I am not yet living in that far off distant land of my dotage. Today is all that any of us has. Both my knees work, I don't require a personal attendant, and to the best of my knowledge no vital organ is about to pack up, so for me, today and tomorrow look pretty good and my $50,000 a year is going to be just about right!

In the meantime, I enjoy my work and each day as it comes.

I hope you do, too.

Cheers
Kristine

 

[JamesGG]

From the responses so far, it seems everyone thinks they'll never need a retirement village or nursing home.

Christ, I certainly hope that I'll never need either of those. Can't think of much worse.

I have a particular goal - and importantly, timeframe - to work towards, and admittedly this has changed substantially over the years as my priorities and frame of mind have also, say, changed... or 'evolved', I think, is perhaps the right word there.

I do still live a somewhat hedonistic lifestyle (and damn, I do enjoy it ) because I don't believe in delayed gratification. Rather, I use my productive time to increase my income from a variety of sources and don't worry too much about what I do or don't spend it on.

In time, I know that it will become perpetually self-sufficient.

For me, it's all about choice. I love what I'm doing and how I'm doing it, and the only thing that may change as my passive income outstrips that from my own efforts is the likelihood of flying overseas with much more than about 24 hours notice.

But, as I get a little older, I want the choice to spend my time at home with whatever family that I might have, and working on various other projects as I please; rather than being chained to a desk. Alex here used to say that his goal was something like 'to do what I want, when I want, with who I want.'

I can resonate well with that.

I do know what I 'need' for that to be possible, and I know what I 'want' for it to be possible in the manner that I want it to. There is, certainly, a big difference between the two. I'm ok with that.