'Retirement' Income % of Working Income

What are people aiming for as their 'retirement' income, as % of working income? Net in pocket to spend, allowing for debt, taxes etc etc. Not fussed about people's actual $, another thread tackled that and demonstrated a wide variance, hence % question to level the playing field. I started thinking 100%, but that's a tall order and would mean higher risk or longer work period, so now thinking of tempering it a bit to try to bring forward 'retirement' date.

 

Aim for 65%...of gross salary should be enough to maintain your lifesyle..this assumes the following:

1. You have a paid off home well maintained home
2. Investments are tax advantaged...ie super (no tax) and in assets like shares with high franking credits
3. Able to split income (you and your partner)

95% of people in Oostralayaa....retire on less than 52k per annum.....net.

 

Hi @sash -I am interested to know more on this part. My understanding is super gets taxed at 15% but in the scenario where 1 wants to retire early then some other arrangements need to be made such as smsf or trust etc because one can only get their hands onto super once they reach certain age?

 

Not advice.....as some nuffies on here

My understandin' is no tax for super after 60

Stuff in shares there is franking credits (assuming mosty local) they are tax advantaged...company tax rate is just under 30% i think..need to check. so up to 80k for personal is 32%? Developed to not double pay tax. As usual talk to an expert..I ist not..'cause I am not edumacated.

Also distributin' via income distribution via tax also helps. Remember 18k odd is tax free.

Get advice...as I am just a yahoo from the internet...

 

Much appreciated @sash . Thanks

 

No wukin' worries...

 

I'm not using a % of working income to derive "retirement" income as it's not the base variable required to determine financial requirements. Not for us anyway.

I prefer to build a realistic cost of living table that can be indexed to ascertain income requirements.

So much of our current income is used to pay down debt, improve our PPOR to reduce future operating costs, take opportunistic breaks/holidays from work or spent as "rewards" to ourselves for working. It therefore doesn't make sense to derive retirement income from working income which I'm sure is the same for some others....

 

That is a great point!

That is why setting a budget without all the income used to pay mortages..private school fees etc.

So lets say you are earning 150k and out of thay you are keepin' 105k..of that you used 45k to pay things which are not relevant to direct living expenses and will not have these in the future (mortgage, school fees).

So you need 60k in retirement.

The based on the 4% rule you divide this into 60k (60,000 / .04) that means you will need about $1.5m to generate this indexed to inflation. I would add a 20-30% buffer to ensure that you manage to keep this going...and to account for property assets which will return much less income.

 

Under current rules, a couple between 60 and 65 can earn $164K without paying tax, goes up to $188K if they are both 65+.

Take these numbers and divide by one’s salary to work out one’s percentage.

I don’t understand why people would want to aim lower than these tax free thresholds .

 

House do ya figure that?

Dhat looks like a gem'

 

@L3ha7 and @sash income earnings inside Super on your super balance in accumulation phase are taxed at 15%, a CGT discount is applied to Capital Gains held over 12mths which can lower the tax to 10%.for Cap Gains.

When you reach preservation age (for those born after 1965) it is 60 years of age and you retire you can apply to receive a pension from your Super. You can have a balance upto $1.6m invested in your pension account part of Super when you first start the pension. The earnings on this $1.6m are tax free. Super above $1.6m is retained in the accumulation part and earnings taxed as previously. Between the ages of 60-65 you must draw a minimum pension of 4% (there is no maximum) of the balance of your Super on 1st July throughout the next financial year.

 

Yep, hence 'net in pocket spend $' in orig post, too many variables for meaningful comparison otherwise.

 

I agree net (what you have in the hand) is most meaningful.

So how much do you need ..based on your analysis?

 

Concur a good basis, but perhaps not realistic for all. Also different approach for <60 y.o.retirees.

 

3 reasons:

1. Most people will never earn that much (net).... ever....
2. Most people really don’t need that much to be content.
3. The higher you aim, the longer you work...time can’t be bought.

Whilst I agree in principal with the tongue is cheek comment, I too am not aiming that high for a passive retirement income. Some may think I lack ambition or drive.... maybe, but I’m not prepared to sacrifice that much time to get there or take that much risk. And, yes, I do know what life is like on that level of net income...

Each to their own...

 

Not sure yet, more analysis needed. It's all about the tradeoff between desired post-retirement, pre-Super income and how early 'retirement' can happen.

 

That is why I used the word “aim “.

As the old saying goes, “Aim for the stars and, if you miss, you still done better than aiming for the horizon and hitting it”.

 

It took me 18 years from knowing nothing, buying first IP and setting up SMSF in 1992 until I retired in 2010.

But then I way overshot.

Yep, each to their own. Some will make the sacrifice, other won’t.

 

Grins. I used that line yesterday in offline chat with that young fella who wanted to retire at 25.

 

Our aim is to fund pre-super retirement phase. We have targeted <12 years prep to fund approx. 10 year duration. Any remaining income or equity that comes across into super phase at the end of pre-super retirement is a bonus.