How Do You Do Retirement Figures?

[lissie]

Yeah so not ending in a retirement home - just shoot me if I am that sick! Actually just re-read Martin Hawes - he advocates 10X as a baseline is more realistic - particularly as many people continue to work part-time. I think a lot of people over-estimate, by a lot, what they actually need. Particularly people who save - they get into the habit and forget about the whole point of it!

[Re@der]

Get the spreadsheet out and for the moment leaving how you earn in "non working mode (NWM) up to you" One approach to this is to look at what income you want from NWM year 1 then multiply that by a 1.026 a year until you are dead. Say 90. This tells you how much money you will need per year. This money comes from 2 sources (Earning or selling assets.You know what you can earn from your assets and can estimate what they may be worth, at sell dates) Go figure when you can retire.

[One]

Three sources. We still have superann at the moment and I doubt we'll ever completely get rid of it. Of course, it's possible it'll become totally means tested. Hmmm.

[lissie]

@Re@der - handy tip and a useful, simple spreadsheet - I assume the 1.026 factor is just inflation ? I included super for my partner (he's only 6 years off collecting it) so this is a very useful way of looking at things.

[speights boy]

@Re@der - handy tip and a useful, simple spreadsheet - I assume the 1.026 factor is just inflation ?

Just another way of expressing similar principle of the year 1 x 24 method.

ie. 80k x 24 = 1.92m
or
80k x 1.026 x 25 years = 2.05m

There are so many unknowns that you shouldn't (IMHO) try to make it too complicated.

[WGN ex-property manager]

Of course if your "cashed up"retirement position is actually in debt free residential property then your income is (roughly) inflation indexed (rents go up with inflation), AND your capital base will outpace inflation (on average), so as long as you are in a good position on day 1 of retirement it only gets better from there!

[speights boy]

Perhaps not quite, if day 1 of retirement was 21st Feb in ChCh

[Re@der]

Agree that you should keep it simple. I have mucked around building up expenses with inflation until I am 80 then leveling off until 90 and dont think that I have got any thing extra out of it. A good year or a bad year on the property investment market wipes out any of these calculations. However for me the idea is to give a target budget so that I can see what my options are regarding working, children housing help ups etc.

[WGN ex-property manager]

Perhaps not quite, if day 1 of retirement was 21st Feb in ChCh

Insurance can almost totally cover this risk if done properly (building insurance + landlords rent protection insurance).

Of course of day 1 was 21st Feb and you're unlucky enough to be one of the folks who got killed, then no amount of retirement savings is going to do you any good

[speights boy]

Insurance can almost totally cover this risk if done properly (building insurance + landlords rent protection insurance).

It would be nice if in the real world it was this straight forward, but as ChCh is proving; it's not.

To have the majority of your retirement income and capital in the hands of insurance companies, with their policy, bureaucracy, conditions and timeframes is not something to make a retiree sleep well at night.

[tpr2]

Figure how much you want in the hand on year one of retirement.
Multiply this figure by 24.
That is the net worth you want at retirement (also assumes no debt)

The key comment here is highlighted above... get that wrong and it doesn't matter what figure you use i.e 20,24 or 22.

It's this figure that most people get wrong because they don't account for inflation in the equation.

i.e $50,000 and retiring in 15 years means if I use the multiplier of 24 our thread starter will need $1.2 million dollars net and that's if she want's $50k gross, if she wants it net, that another equation.

So $1.2 is the goal but hang on.... in 15 yrs time that 50k won't buy a new pram (slight exaggeration but I just had a new baby last week so prams are on my mind at the mo) so what should she be aiming at?

Assuming inflation rolls along at say 3% to be conservative the equivalent income will be $77,898.

Multiply that by your 24 and you need $1,869,552 a massive $600,000 more than the original calculation.

[speights boy]

Correct One, that year one income is the important figure to guesstimate.

Absolutely correct Terry, as I said here.

[lissie]

I am looking to retire either later this year or next - so I think my current first year budget is pretty spot on! In practice I will keep running my business - which will produce most of the income - as a backstop - the other option of course is to leave NZ and make the dollars go further somewhere warmer (Thailand or Philippines at the moment) - though I need to read up on the restrictions on NZSuper if we stay too long out of the country

[tpr2]

I am looking to retire either later this year or next - ...........

That certainly does make things easier

[tpr2]

I am looking to retire either later this year or next - so I think my current first year budget is pretty spot on! In practice I will keep running my business - which will produce most of the income - as a backstop - the other option of course is to leave NZ and make the dollars go further somewhere warmer (Thailand or Philippines at the moment) - though I need to read up on the restrictions on NZSuper if we stay too long out of the country

Hi Lis

I had a look at your blog as well, seems we have something in common besides PT.

I started dabbling in web stuff in easter 2007 after having lunch with Mark Joyner and being blown away by how his business (online) was so different to mine in terms of overheads and time commitment.

That was it... I was hooked and still am to this day.