Retirement Stories

If you Google the title “How much do you need to retire” you will see hundreds of articles on the subject, most of which have been written by financial planners, fund managers and accountants. The Marcus Today 'community' has many financially sophisticated (and unsophisticated) retirees in its ranks many of whom have already experienced decades of retirement so we decided to take a different approach and rather than tell our Members how to retire, we asked them how to retire, because quite honestly, we're not retired, and a lot of them are, so who should be lecturing who? We sent this article out (you don't need to read it) asking our Members two simple questions, “What is your Retirement Calculation?” and “Do you have any other retirement wisdom to share”. We received around 200 emails in reply. Here are some of the numbers, some of the revelations and some of the wisdom. THE NUMBERS The answer to the question “How much do you need to retire?” clearly revolves around three main questions and the answers come in ranges, with a thousand variables and what-ifs. But there is a standard answer:

1. How much do you need to live off in retirement? The answer is generally $65,000 (singles) to $200,000 (wealthy couples) per annum with most assuming around $100,000 pa.
2. What return on investment on your capital can you expect? The current number is anywhere from 3% to 10% pa less inflation with most retires are assuming they could and should be able to earn 5% pa after inflation.
3. So how much do you need to retire? The capital required from those calculations ranges from $650,000 to $6.6m with $2m the standard amount for a $100,000 income pa and an investment return of 5% pa.

GETTING STARTED You will not retire without planning to retire. A clear theme in these stories is that everyone retires in the end and you will be ‘pushing that boulder up the hill’ for a lot longer if you don’t plan to retire.

• You have to plan to retire or it will happen to you, not for you. Don’t just let it happen to you.
• The earlier you plan to retire, the happier it will be and the earlier it will be achieved.
• Happiness is expectations met. You can retire happy a lot earlier if you develop realistic expectations.
• Start today. Retirement is inevitable. We are all going to have to get our heads around it one day, so why not today.
• It is never too early, but it can be too late.
• The sooner you get your ‘retirement antennae’ up the sooner you will pick up what you will one day have to pick up.
• Planning your retirement has tremendous mental benefits. It provides future certainty, peace of mind, security, common purpose, a sense of achievement, and a reason for not spending a lot of money pretending to be rich.
• Don’t let the complexity of Super legislation put you off. It’s not all about tax breaks (that’s all Super is). There are more important principles to accept. Like earning more and spending less to achieve your goal.
• Once the kids are done and dusted, retirement goals replace them as a motivation to get up in the morning, succeed and achieve.
• The first step to retirement does not involve paying $15,000 to a financial planner. If you think that’s what it takes you’ll never start. The hardest part is starting. That can come from a chat at dinner, a napkin with squiggles on, opening Microsoft Excel with your partner and doing some basic projections. Your sophistication and understanding of what is required will develop from there. Just start.

TEN PIECES OF RETIREMENT WISDOM THAT MIGHT SURPRISE YOU These comments are from Members themselves.

1. “Look at your relatives and ancestors and you can work out how long you are going to live. How long you live is a major variable in all your calculations. Unfortunately for me most of my family lives to over one hundred unless they are murdered or run over. So I’m not going to be able to afford to retire early.”
2. “It is better to retire at 62 and live off $70k per annum than at 70 with $100k per annum. I see a lot of people (I'm a financial adviser) afraid to retire in their 60s, who keep pushing the boulder up the hill till they're 70. In their 70s they bitterly regret having put those years into work that could've been spent doing the Camino while they were young(er) and healthy(er). Money generally gets worth less when you're older.”
3. “If you have more than one child never ever ever leave them any joint assets that require an investment or disposal decision. Be that shares to be managed or property to be rented or sold. Insist that everything is sold and the cash divided without them having to agree on anything. They can make their own investment decisions from there with their own partners, families, themselves. The last thing you want is one child thinking they can, or being forced to be, responsible for ‘managing a portfolio’ or ‘managing property' on behalf of the others. There is only one outcome from there. And it’s not good. And if you think they can agree, wait until their spouses, kids, friends, get involved! Do their relationships a favour. Only ever hand them assets that have been sold already, are to be sold immediately, or cash to be distributed. Nothing joint. Unless you want them to hate each other. The last thing you want on your deathbed is to hear your kids shouting at each other in the kitchen.”
4. “The Government hands us control of our own super, regardless of how much we know or care about financial markets or investment. No wonder so many people end up on the age pension. If you are not interested just put it in a fund. They may not be exciting but they'll catch a long term bull market and logging into a website once a year is a lot easier than managing your investments every day, especially if you don’t enjoy it, don’t understand it and cock it up. And let me tell you, being your spouse's fund manager is not good for your marriage!”
5. “Everyone talks about leaving money to the children. Let me improve everyone’s retirement by a million dollars. Only in extreme cases would they factor in my calculations. I don’t plan on giving mine anything. If I live until I’m 90 they will be retired. You will obviously assess your own children according to their own circumstances but most are not the vulnerable needy children we imagine them to be when we first make our retirement calculations. By the time they inherit they will be older. We don’t need to sacrifice our quality of retirement for them to have an even better quality of retirement. They wouldn’t want it anyway. And the grandkids will be thirty. They won’t need it. Forget the kids unless they really are in need. Which is rare.”
6. “Tell your kids they are not getting an inheritance and your kids will quickly become responsible for themselves, get up earlier in the morning, make more financial effort, establish their own financial security and be even more thrilled when they get something, which they were always going to get anyway. But you don’t need to tell them. They will be better for not expecting to be looked after.”
7. “I hadn’t thought enough about who I am, what I want to do, and how I would be productive, healthy and challenged once “work” stopped. I had no idea how many hours of my life I had sold to employers, and equally, no idea what to do once that time became my own. We now have detailed spreadsheets that are updated daily, with projections of assets, income and expenses on a monthly basis, well into the future, using accurate information as it comes to hand and reasonably conservative assumptions about the future, property maintenance costs, super contributions and future drawdowns, and on it goes. This information has been crucial to me, to build confidence in a future without income from employment.”
8. “The most important thing is not to leave the kids with a problem! Having worked for many years as a rural GP I have seen the damage a poorly structured will and consequent greed can do. So leave some but not enough to cause a fight, divided absolutely equally despite each child’s financial position, let the kids' generosity solve the need of one sibling who may be in need.”
9. “We've been married sixty years and retired for 25. In many ways we live separate lives together, enjoy strong acceptance and don't have too high expectations of each other. I have many friends financially devastated by broken marriages.”
10. “What caught us by surprise in retirement? The joy of freedom.”

OTHER WISDOM Here are some of the other pearls of retirement wisdom extracted from the emails.

• Things are a lot easier to plan if you know when you’re going to die and that assumption is a critical part of the equation. We used the age of our oldest grandparent. Problem is, they are still alive and get a year older every year meaning we are progressively underfunded. So take your oldest grandparent and add 10!
• Our biggest surprise in retirement? We have not spent nearly as much as we expected. You don’t need as much as you think.
• The financial uncertainty of future returns is the biggest worry.
• A happy retirement has more to do with how you approach life than how much money you have.
• Play play play, when young. Having regrets is miserable.
• We both had similar views when we were young. To be self-funded retirees and to retire early enough to enjoy it. Having retirement goals and planning for those goals was key.
• We sacrificed the 'nice to have' stuff in order to achieve our goals.
• We instilled the value of a hard-earned dollar into our children. So we don't necessarily think about leaving them anything. It will be what it will be. They are already well on the way to becoming financially secure without us.
• Work just as hard on your health as you will on your finances.
• The sooner in life you focus on your net worth (assets minus liabilities) the sooner you will become aware of your wasteful spending habits and make adjustments so that you have sufficient funds to achieve your retirement goals.
• Start thinking about and planning for retirement early enough to build wealth. I started in my mid 40’s. Leaving it to your mid 50’s is probably too late!.
• You can educate your children about financial planning but you have to make sure their spouses are on board.
• My next-door neighbours lived in abject poverty on a decent block in a good suburb. At the age of 90, he died with a 1957 Holden FE in the garage (he was NOT a collector – it was his car). She was left alone and for some months we would see her walking alone to the local IGA two kilometres away and come back with bare rations. She could not drive the Holden. We all helped but she died soon after he did. Two months later their only daughter and her husband turned up in a BMW 7 Series and pocketed $999,999 from the auction of their house. Not sure what they got for the Holden. Something wrong there. Not all kids need you to look after them.
• We don't want to budget heavily and at some point, we will just stop the investing part. Meaning less arguments about money, hopefully.
• Mine is probably not a normal situation but what is normal when it comes to retirement.
• Retirement did take some considerable planning along with appropriate money management over a long period of time which I think is the key to where we are now. Too many leave it too late not to mention a high degree of apathy amongst the population. I guess anyone prepared to subscribe to your advice are obvious exceptions.
• For the first 10 to 15 years you live it up. After that you are probably not capable of doing much, so the money needed is not as high.
• The Richest Man In Babylon was an influential book I read 40 odd years ago.
• You use the house to take care of old old age (aged care etc). Probably at age 80.
• Don’t plan for the kids to get anything. That is not an objective. If there is anything left, good luck to them.
• One of the mistakes is trying to build up too much of a fund which will end up going to the kids.
• Another mistake is not spending the bulk of the saving in the first 10 years of retirement.
• You don’t have to be wealthy to be as happy as Larry.
• Ensure wills and estate planning are appropriately structured.
• One of the big mistakes people make when planning retirement is not factoring in the rising cost of living. It always outstrips the official CPI data.
• We have the advantage of no kids to support making it easier to save, and the disadvantage of no kids to look out for us in our dotage, so we need to be sure we’ll have a comfortable excess of funds.
• The $100K we spent on an inclinator 5 years ago was our best indulgence yet and another similar amount on an elevator will keep us in our house not a home long term.
• We don’t plan to downsize to fund retirement, all the apartments I like cost as much as our house!
• Compounding really does seem magical when you get to the point that your investment earnings considerably exceed wages. It’s a happy place to be.
• One concept I found particularly annoying was a frequently recommended allocation basis set entirely on the basis of age - so in my case being 70 years of age, a portfolio comprising 70% fixed interest/bonds and only 30% equities. No rational basis was provided to support this formula, nor any empirical data to evidence its merit despite it being presented as a “proven method”. Common sense screams that it’s a hopelessly unreliable rule of thumb method because it has no regard for the size of the funds available.
• I am now retired at age 70, but as a former Chartered Accountant and financial planner advising my clients on retirement, my view on a comfortable retirement was to have a house, no debts and $2 million invested, earning 5% net of tax per year. Considering I had that view more than 10 years ago, I could say it should be indexed up to, say, $3 million invested, but I still think $2 million is probably enough.
• COVID caught us by surprise. In March 2020 our portfolio tanked by $850K, borders slammed shut, and we spent the majority of 2020 walking around the block with the dog.
• Everyone should have a cash flow projection on a spreadsheet. Mine covers the next 20 years.
• Medical issues in old age can change one’s plans dramatically.
• Don’t rely on the Govt for anything. Being a self-funded retiree gives me a great sense of freedom. It's worth having that instead of a Govt pension card with associated concessions.

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In the PDF documents below are direct copies of the emails from Marcus Today Members answering the question:

WHAT IS YOUR RETIREMENT FORMULA?

Thank you for all your contributions. If you would like to contribute to the discussion with your wisdom please email marcus@marcustoday.com.au with the subject line “MY RETIREMENT FORMULA”.

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