Author: Michelle Griffiths, Partner, TAG Financial Services
A real-life case study.
I recently met with a couple that were looking at early retirement at the age of 61.
Their financial position included:
- About to inherit a $750,000 share portfolio and some cash.
- Own an investment property worth $550,000 that is borderline positively geared, with principle and interest loans.
- Own their home worth $850,000.
- Have about $400,000 in superannuation.
- Live a simple lifestyle and spend about $55,000 per year.
Is early retirement possible?
A great way of looking at this question is through our wealth projection modelling.
For example, if your spending includes an annual holiday that costs around $8,000 per annum (up to age 83) and a BIG holiday every 2 years up to age 70 for $20,000 + factoring in turning over cars, and Major Repairs and Maintenance on the house – the amount for cost of living that would be sustainable would be $55,000 per annum (approx.).
The modelling looks like this:
As you can see, your money lasts. However, there are things you can do to improve this position further – using superannuation more effectively could mean the difference of allowing living costs of $58,000 per annum ($3,000 extra per annum) – to give the same overall net asset position at age 95.
How can our Wealth Projection Tool help?
Our wealth projections process not only gives you some clarity on how much you can afford to have as a lifestyle, but also, in this example, illustrates at what point selling the investment property would be necessary to create the liquidity required to continue living comfortably without sacrificing your standard of living.
This will prevent you from being “asset rich and cash flow poor”, which is not a comfortable position to be in.
Any Questions?
If you have any questions or would like to discuss more about how long your money will last, please contact us on 03 9886 0800 or via email.
What should you do now?
Meet with us!
If you would like to discuss your retirement further, contact us to arrange a time.
Wealth Projection Tool
Our most powerful tool for wealth creation. TAG’s Wealth Projection Tool will show you how long your money will last, is easy to understand, provides clarity and helps create targets and goals. Contact us to arrange a time.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2023. Please do not reproduce without the expressed written consent of the author.