Knowing when you have enough money to retire and then to actually retire are massive decisions, and for me very very scary. We have all had to make the big calls in our lives and this one is up there!!!
But how much do we actually need to retire? There are so many discussions and threads about how much you need in retirement; from $1 million to $2 million and up to 25 times your annual salary. Also, everyone’s circumstances are different; do you leave a legacy for your children – if you have any, or do you ensure as Martin Hawkes said in one of his books something along the lines of “aim to ensure the last cheque you write to the undertaker bounces”. He was in essence using the decumulation principle leaving no funds behind. For us if we end up having money leftover after we both die then that is a bonus and that will go to our family as part of the final estate.
Speaking of the decumulation principle, I did find the author and he actually calls it “flawcasting” as the only thing he can guarantee is that it will be wrong. This is a link to his website https://wealthandrisk.nz/ and if you look for his podcast on flawcasting.
One of the blogs that I regularly read is from Mr Money Mustashe, which is about FIRE (Financial Independence Retire Early), which as you may know has grown into a huge movement. One that I go back to every now and again and kick myself is called the shockingly simple math of retirement. Looking at this, we should have started on this with a more focussed view many years ago but didn’t – hence the kicking. But here we are with around six years to go until we cease full-time employment. Which in essence is pretty good. One or both of us may still work, but what that work looks like who knows.
The money. For us – mainly me, have tracked how much we’ve spent per month for a number of years, (ok about 10). I’ve grouped these under various “buckets”; bills, living, and frillies (not my name, I blame our advisor for this). Bills are the regular monthly or yearly costs; things that go into this bucket are rates, insurances, power, internet, Sky, cellphones, etc. I haven’t added in our mortgage as know that when we retire that will be paid off, so didn’t factor that into our yearly/retirement spend. Next is the living bucket; groceries, dog food, vet, doctor, petrol, pharmacy, and so on.
Lastly is frillies. These are things that are extras and planned (or meant to be planned) like; hair, movies, concerts, presents, dinners, holidays etc. This area is where you can drastically cut if required.
From there worked on how much we currently spend per year, then after a bit of a gasp, looked at what we could trim so we could have enough savings to retire at 60. As chatted about previously lockdown has shown us that we don’t actually have to spend money. We do have a financial advisor who has helped us with our properties, insurances, and investments. She does not tell us what to do (althought at times she wishes she could) but gives advice around the pros and cons of ideas we come up with. Admittedly some of the ideas I have come up with over the years have been a bit hair-brained. She does take on a holistic approach and she was amazing with options for my late Mum when she was in her last years of life. Another story.
Back to yearly spend, we tracked what we were spending and looked at where we could trim; insurances, groceries, superannuation, takeaways, coffees, and vehicle costs. Insurances were mainly were about medical and life insurance. We have no kids and so there is no reason to pass on any lump sums-if we actually have anything leftover🤣
Ms. S has free life insurance with her work of $100k and I have superannuation from a previous role super that she is entitled to half if I died before her. So we have enough to cover expenses, and decided to scrap the life insurance. Medical insurance, boy is that a minefield. As you get older your premiums will go through the roof as things wear out. With emergency surgeries covered by government funding, and accidents by ACC, what is left are the costs of the more aged related stuff; cataracts, hip, knee, shoulder replacement, breast reconstruction (after cancer surgery) and teeth maintenance, which more than likely will be removal-groan.
Takeaways and coffees are a no brainer, and groceries, we have meal plans and shop with a list. There is a good app we use “Buy me a pie” which all members of the household can use to build your grocery list. You just add on things as you see you need them. Saves of that hassle of trying to remember how many packets of coffee you have on the pantry shelf when you are in the grocery shop!!
We have saved quite a chunk and have invested these to accrue some interest. However with COVID-19 still rampant around the world and severe recession looming, we are looking at our options for our investments that are sitting gathering limited interest. Thoughts are around subdividing our rental property and build some new houses. With the Government trying to have shovel ready projects going and with a shortfall in housing, it seems like a very good idea. Have no idea where to start but am sure there are some good websites and information from the local Council. Did some rough calculations and may be worthwhile.
Right, you get the picture; know what you spend per year, look where to trim, save the difference, and then determine what to do with it to get you to ceasing full-time employment. I do think it is worthwhile to get an advisor, one that does have the appropriate accreditations. I thought I knew quite a bit about all the ins and outs about finance and tax, but in the end, this is their full-time job. I found out that Google doesn’t have all the rights answers.
A couple of posts ago I set myself some tasks for June:
- Complete spare bedroom declutter – half done
- 4 items actually up on Trademe – yes completed
- Items not sold to either the Op Shop or Transfer station – not yet
- Veggie plants still alive – regular check slugs haven’t nailed them – yes
- Native plants arrived and planted in the ground (novel approach) – done
- Walking 3-4 times per week – yep all good
For the rest of July;
- Clean out the garage (actually a big task)
- 4 more items actually up on Trademe
- Items not sold to either the Op Shop or Transfer station
- Order veggie seeds from Kings seeds
- Walking 3-4 times per week
Next time – What if things go wrong in retirement