Your target retirement capital and income

Some are stating that this is when you have paid of your PPOR and dependants are all grown up. But that might not be the case if you retire early. I am assuming everyone's figure is factoring in the period in time which they wish to retire. That may mean mortgage and kids still in play.
I know for me when I calculate my desired retirement income I factor in my current expenses that includes young kids, travelling habits, eating habits e.t.c.

 

For us, our target FIRE income also includes all current expenses (including young kids). But what if your "passive income outside super" plus "passive income from super" matches your requirements - however you still have 15 years until you can access it? Would we be comfortable drawing down on capital knowing that super will be cutting in later? Or do we work longer to boost the pre-super passive income?

The solution for me is probably a bit of both - maybe working longer but in a more relaxed manner (short term contracts, less days per week, more holidays etc) until pre-super passive income gets closer to our requirements - maybe making up a shortfall with saved cash.

Then we'll have double two possible lifestyles boosts - one when the kids leave home and one when super kicks in

Regards,

Jason

 

That's exactly the point. There are no "lifestyle needs". They are lifestyle wants. Needs are food, shelter, clothing and warmth. And I wont even quibble about the style of house and clothes and food. All the rest is a want not a need.

Mind you, I'm not saying there is anything wrong with wanting a "higher" (define that as you like) retirement income. My target is $80k per year and I'm not against having more than that either!

Just don't fool yourself into thinking a want is a need.

 

My wife and I eat out about once a week, go out to the movies, theatre or just with friends about every week, own two cars and have to drive just about everywhere due to distance, went to Hawaii last year, my wife buys things far more often than I would like and we have to pay rent and we didn't spend over $60k last year.

An "absolute minimum" of $80k per year would be buying a lot more than "needs".

 

Many people carefully calculate the number then
1: divorce occurs
2: children cannot afford a house or divorce
3: health problems
4: relocate to a more expensive city
5: live too long
You need to exceed your target to allow for the unknowns

 

Totally agree. But I’m not sure the purpose of the thread is about your target income to cover needs. So I think when people are saying they need $80k minimum they are referring to there target income rather than there actually needs to live.

 

That's for two of us. Obviously there are other costs on top, but we could comfortably live on $60k after tax!

 

I get that.

I was responding to the poster stating a minimum of $60k per year was required just to cover the necessities.

 

When you're all doing your calculations, however you define them - wants, needs, desires - whatever, are you including the equivalent of a "sinking fund" for replacement of large items (cars / appliances) and a "maintenance fund" which accrues for larger expenditure items around the house/apartment itself which can be foreseen to need replacing/upgrading at some stage in the future due to wear and tear and the like?

I can live reasonably well at lower levels of after-tax income too, but if I want the occasional new car and other creature comforts, I'm finding that allowing for those adds significantly to the "required" income.

Plus I always have a series of "what if!!!!?" things that would keep me awake at night if I didn't allow for them - major house repairs, health costs, drug habits (<- kidding!) and the like.

So I could "live" on $X, but to allow for all the other things, then my income required is significantly above $X. And if I get 10 years in and I don't spend the extra, then there are always yachts and expensive guitars...

I'll add that I'm not there yet, so it's all just theory to me, but I'm setting what I'd see as a "healthy" required income because of various known unknowns.

 

My target of $80k per year (more is acceptable too!) takes into account all those sorts of things. Along with the main insurances (eg: house, health, comprehensive car) to cover me for the really big unexpected costs. Major health issue costing squillions? If my health insurance doesn't cover it, I'll sell capital and wait for the Superannuation boost to come along before enjoying my next OS holiday.

 

What is a superannuation boost?

 

As wylie said, it means when I can access Super. I consider it the icing on the cake and don't take it into consideration at all when determining my target retirement income.

 

Gotcha

 

The target is what you are able to achieve. No more and no less.

Between the now and the then, circumstances out of your control will happen.

 

Interesting tipping point. The assets are enough to produce retirement level income (say 100k), but your job also pays 100k. If you quit, due to age etc you will never work at that level of salary again.

Do you continue working and double your income, which might go to children or charity or more lifestyle?

 

If your career/skills allows why not work part time for an interim period? Live off your investment income (to confirm you can in fact live off it!) and top up your investments/cash buffers with the income you earn). That's my intention (5 yrs - live of investment income and drop work by about half, 10 yrs - what's work?)

Jason

 

Apparently I've done everything wrong but it seems like it worked out great for me. One thing I can say is I have had heaps of fun, great experiences and learned so much on my adventure. In fact, the only thing that let me down was bad advice from this forum. Even that was useful though because it taught me a valuable lesson and helped me get where I am today.

This is actually a good thread to mention this but I have recently been looking at my retirement goals. I could set goals to have:
$1,000,000 in super
$3,000,000 in residential property
$1,000,000 in an ETF like VAS
then work for the next 20 years until I reach those goals.

But.... do I need that much? How do I set realistic goals? If I could set realistic goals and retire from full time employment in 10 years instead of 20 years.

In terms of income, I could draw 5% from super without impacting capital, which is $50,000 per year, the rentals will return around $90k net. I don't know what $1,000,000 of VAS would return.

That is a lot of money from my point of view. I really don't know how I would spend that much. I'm a low spender, so that is very excessive for me.

How do I set realistic goals?

 

I have detailed records of every cent that comes in and every cent that goes out. I just ran a full analysis of the 2019 calendar year and my annual household expenditure... everything, and I mean everything was just under $25k. That includes travel but I didn't go on any big overseas trips.

Things that matter: house paid off and no kids.

 

That's pretty good if you spending $25k pa!