sharetrader
Page 1 of 32 1234511 ... LastLast
Results 1 to 15 of 480
  1. #1
    Gnawing on Bones Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    11,628

    Default How much capital do I need to retire comfortably on ?

    Just thought it might be a good idea to float this as a subject seeing as that's the reason many of us invest !!

    I am sure many of us readily recall that famous line from the movie Wall Street when Bud Fox asked Gordon Geeko, How much is enough Gordon, How many Yachts can you waterski behind ?

    So how much is enough ?

    First up its clear everyone will have different idea's and different goals and aspirations regarding their lifestyle in retirement.
    Secondly everyone will have different perspectives on when they want to retire and will have varying idea's about their likely lifespan when they retire.
    Others will continue to enjoy working part time in their career or their business even after retirement.

    There's also the open question of whether the Government will have sufficient funds to keep paying the superannuation when the huge tidal wave of baby boomers retire.
    Will they bring back some sort of National Superannuation surtax like in the old days or is this such a huge political hot potato no party would dare take a position that would offend the grey tsunami ?
    Will there be some sort of wealth or inheritance tax in the future ?

    So how does one go about some sort of logical reasoning in terms of retirement planning ?

    Lots of questions and I'd love to know others plans but for what its worth here's a starting point for consideration.

    If one were to take the viewpoint that they'll work on until they're say 70 (at least part time) then how much capital should one have to live comfortably, (talking today's dollars) ?

    Does one take the view that $1m should cut the mustard and with a well diversified portfolio of stocks and bonds earning an average return after tax of 7% should be possible, $70,000 per annum.
    Add in national superannuation and some part time work or rent from a rental property or two and assuming your mortgage free on your house then all should be good right ?

    Thoughts ?
    Last edited by Beagle; 21-04-2015 at 08:28 PM.

  2. #2
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    12,148

    Default

    Most of us here are investors.
    To start investing you first of all need to live within your means.
    Only then can you start to invest,spare cash.
    I do not think it makes a great deal of difference whether you invest in property,shares,art or whatever,so long as your do your research and are not greedy.
    Therefore I think most of us on sharetrader will make sure we can live on our retirement income,whatever it turns out to be.
    On the other hand, there a great number of people who can not live within their means.These people reach retirement age with either no house,or a house with a large mortgage.They can not afford to give up work.Life then becomes very hard for them.
    So back to how much money do you need to retire on.Depending on where you live,your lifestyle,and health I would say someone living in the South Island with modest requirements could safely retire with a free hold house worth $350,000 and about $300,000 invested returning 5%.For a couple that would be $15,000 from investments plus super of approx. $25,000.
    Move to Christchurch your house would most probably be approx. $500,000 and your investments would need to be worth approx. $600,000.
    Move to Auckland,your house would most probably be worth $1,200,000 and you would need investments worth close to $2mil.
    I am 66 and am still working.This has a huge influence on where you are.My work is the same as having approx. an extra $800,000 invested.I still love my work.
    Last edited by percy; 21-04-2015 at 08:37 PM.

  3. #3
    Gnawing on Bones Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    11,628

    Default

    Quote Originally Posted by KW View Post
    The Mr Money Mustache blog goes into this question in great detail - http://www.mrmoneymustache.com/2012/...or-retirement/

    To summarise, its about 25 times the amount you spend to live comfortably, assuming a 4% withdrawal rate over time. The lower your consumer spending, the more you can save, the earlier you can retire. So if you can live on $40k per year then you need $1 mil.
    Thanks KW and I'll enjoy having a good look through that ASAP. We have one of the highest yielding markets in the world whereas on the other hand a typical dividend yield on an American share might only be 2%. Do you think that's a material factor for N.Z. retirees ?

    Quote Originally Posted by percy View Post
    Most of us here are investors.
    To start investing you first of all need to live within your means.
    Only then can you start to invest,spare cash.
    I do not think it makes a great deal of difference whether you invest in property,shares,art or whatever,so long as your do your research and are not greedy.
    Therefore I think most of us on sharetrader will make sure we can live on our retirement income,whatever it turns out to be.
    On the other hand, there a great number of people who can not live within their means.These people reach retirement age with either no house,or a house with a large mortgage.They can not afford to give up work.Life then becomes very hard for them.
    So back to how much money do you need to retire on.Depending on where you live,your lifestyle,and health I would say someone living in the South Island with modest requirements could safely retire with a free hold house worth $350,000 and about $300,000 invested returning 5%.For a couple that would be $15,000 from investments plus super of approx. $25,000.
    Move to Christchurch your house would most probably be approx. $500,000 and your investments would need to be worth approx. $600,000.
    Move to Auckland,your house would most probably be worth $1,200,000 and you would need investments worth close to $2mil.
    I am 66 and am still working.This has a huge influence on where you are.My work is the same as having approx. an extra $800,000 invested.I still love my work.
    I think there will be a growing trend of retiring folk in Auckland cashing up their homes and moving to the provinces, (crossed my mind already but I'd get bored retiring early).
    Can you please explain your thinking on why someone needs more invested capital to retire on in a major city ? Clearly their rates and insurance would be higher than in the provinces but all other costs about the same wouldn't you say ?
    Last edited by Beagle; 21-04-2015 at 09:05 PM.

  4. #4
    Member
    Join Date
    Nov 2013
    Posts
    361

    Default

    Born in '85.

    I do not expect that superannuation will exist or be a meaningful contribution by the time I get to retirement age.
    Most stocks in my portfolio now are intended to be held until I retire and beyond.

  5. #5
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    12,148

    Default

    Quote Originally Posted by Roger View Post
    Thanks KW and I'll enjoy having a good look through that ASAP. We have one of the highest yielding markets in the world whereas on the other hand a typical dividend yield on an American share might only be 2%. Do you think that's a material factor for N.Z. retirees ?

    I think there will be a growing trend of retiring folk in Auckland cashing up their homes and moving to the provinces, (crossed my mind already but I'd get bored retiring early).
    Can you please explain your thinking on why someone needs more invested capital to retire on in a major city ? Clearly their rates and insurance would be higher than in the provinces but all other costs about the same wouldn't you say ?


    Yes mainly rates and insurance.A property worth $150,000 less ,would mean $150,000 more for investment.

  6. #6
    Gnawing on Bones Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    11,628

    Default

    I went to a retirement conference put on by the (as they were known at the time, New Zealand Society of Accountants). Was about 15 or thereabouts years ago and really freaked me out.
    So called experts there reckoned you need $1.5m - $2.0m to retire comfortably on and had a raft of expert opinions and analysis to back it up.

    Key Themes they espoused at that time included.
    1. Despite a widely held belief by many older folks they are happy to trade down in their house when the time comes to retire, so as to free up capital, the evidence suggests most people are extremely reluctant to do so.
    2. Best to plan on an average of 3 - 4% per annum after tax from a well diversified portfolio of low risk investments.
    3. It is best to plan that National Superannuation in its current form won't exist when it comes time to retire.

    When I have more time tomorrow I'll unpack why I believe all these three major theories are fundamentally flawed.

  7. #7
    Guru
    Join Date
    Nov 2013
    Posts
    3,043

    Default

    People off say you can downsize in retirement and your living costs reduce. That is fine while you are healthy and mobile, and then die suddenly.

    With modern medicine though, you are more likely to live to a very old age, requiring lots of medical and home care assistance. So you need to ask yourself, not just what sort of active retirement do you want, but what sort of retirement do you want once you are no longer healthy and active.

    My Grandparents decided they wanted to say in their own home. That's all well and good but 24/7 care costs $200k a year if you go through an agency and that doesn't include all your other costs. Sure that is the expensive way but what would a similar level of care cost in a nice retirement/care facility? $100k. And how long can you last in that condition - my grandmother was looking dodgy for a while but then they put a pacemaker in (at over the age of 90!) and now she will probably live till 100! 10 years x $200k = $2m - Ouch! and that is just from the age of 90. God knows how much they spent from 65 to 90 when they were still active enough for multiple overseas trips a year.

    I'm aiming for $10m plus on the basis I dont lead a cheap life now so why would I want to in retirement. I'm quite a bit behind where I should be unfortunately.

  8. #8
    Guru
    Join Date
    Apr 2008
    Location
    Sth Island. New Zealand.
    Posts
    4,372

    Default

    Quote Originally Posted by percy View Post
    Most of us here are investors.
    To start investing you first of all need to live within your means.
    Only then can you start to invest,spare cash.
    I do not think it makes a great deal of difference whether you invest in property,shares,art or whatever,so long as your do your research and are not greedy.
    Therefore I think most of us on sharetrader will make sure we can live on our retirement income,whatever it turns out to be.
    On the other hand, there a great number of people who can not live within their means.These people reach retirement age with either no house,or a house with a large mortgage.They can not afford to give up work.Life then becomes very hard for them.
    So back to how much money do you need to retire on.Depending on where you live,your lifestyle,and health I would say someone living in the South Island with modest requirements could safely retire with a free hold house worth $350,000
    Every now and then my pedantic nature takes over. So may I say almost all South Island houses are freehold. The term 'freehold' refers to tenure and essentially means the title is fee simple, or not leasehold. It's common street-talk for a property owned with no morgage, but it's incorrect and has no place in an investment forum. The correct term for a property not held under a mortgage is unencumbered, or simply mortgage-free. The majority of NZ homes are freehold, but are mortgaged.
    Last edited by fungus pudding; 22-04-2015 at 09:07 AM.

  9. #9
    Update Ready To Install
    Join Date
    Aug 2010
    Location
    Floating Anchor Shoals
    Posts
    7,283

    Default

    So right Harvey re medical costs and don't get me started on what specialists charge!. I want to be able to help family members occasionally with medical costs, education etc and donate to good causes .I'm thinking re $1.3-5 million plus a house is what i need.. I don't currently have a house, all funds in shares, fixed int and some cash atm.

  10. #10
    Advanced Member BIRMANBOY's Avatar
    Join Date
    May 2011
    Location
    Wellington
    Posts
    1,550

    Default

    The size, quantity and variety of cheese usually spurs the avid treadmill devotee on to the necessary levels of effort. Keep up the good work
    Quote Originally Posted by Harvey Specter View Post
    People off say you can downsize in retirement and your living costs reduce. That is fine while you are healthy and mobile, and then die suddenly.

    With modern medicine though, you are more likely to live to a very old age, requiring lots of medical and home care assistance. So you need to ask yourself, not just what sort of active retirement do you want, but what sort of retirement do you want once you are no longer healthy and active.

    My Grandparents decided they wanted to say in their own home. That's all well and good but 24/7 care costs $200k a year if you go through an agency and that doesn't include all your other costs. Sure that is the expensive way but what would a similar level of care cost in a nice retirement/care facility? $100k. And how long can you last in that condition - my grandmother was looking dodgy for a while but then they put a pacemaker in (at over the age of 90!) and now she will probably live till 100! 10 years x $200k = $2m - Ouch! and that is just from the age of 90. God knows how much they spent from 65 to 90 when they were still active enough for multiple overseas trips a year.

    I'm aiming for $10m plus on the basis I dont lead a cheap life now so why would I want to in retirement. I'm quite a bit behind where I should be unfortunately.
    www.dividendyield.co.nz
    Conservative Investing and dividend producers...get rich slowly!
    https://www.facebook.com/dividendyieldnz

  11. #11
    El Toro~
    Join Date
    Jun 2014
    Posts
    376

    Default

    Quote Originally Posted by percy View Post
    Most of us here are investors.
    To start investing you first of all need to live within your means.
    Only then can you start to invest,spare cash.
    I do not think it makes a great deal of difference whether you invest in property,shares,art or whatever,so long as your do your research and are not greedy.
    Therefore I think most of us on sharetrader will make sure we can live on our retirement income,whatever it turns out to be.
    On the other hand, there a great number of people who can not live within their means.These people reach retirement age with either no house,or a house with a large mortgage.They can not afford to give up work.Life then becomes very hard for them.
    So back to how much money do you need to retire on.Depending on where you live,your lifestyle,and health I would say someone living in the South Island with modest requirements could safely retire with a free hold house worth $350,000 and about $300,000 invested returning 5%.For a couple that would be $15,000 from investments plus super of approx. $25,000.
    Move to Christchurch your house would most probably be approx. $500,000 and your investments would need to be worth approx. $600,000.
    Move to Auckland,your house would most probably be worth $1,200,000 and you would need investments worth close to $2mil.
    I am 66 and am still working.This has a huge influence on where you are.My work is the same as having approx. an extra $800,000 invested.I still love my work.
    Agree with everything in this post, well written, Percy

  12. #12
    Permanent Newbie
    Join Date
    Mar 2010
    Posts
    792

    Default

    Income Required for Financial Freedom

    Before Tax After Tax @33%
    $70,000 $52,632


    Capital Required at different rates of return
    Yield% Capital Difference 1%


    1% $7,000,000
    2% $3,500,000 $3,500,000
    3% $2,333,333 $1,166,667
    4% $1,750,000 $583,333
    5% $1,400,000 $350,000
    6% $1,166,667 $233,333
    7% $1,000,000 $166,667
    8% $875,000 $125,000
    9% $777,778 $97,222
    10% $700,000 $77,778
    11% $636,364 $63,636
    12% $583,333 $53,030
    13% $538,462 $44,872
    14% $500,000 $38,462
    15% $466,667 $33,333
    16% $437,500 $29,167
    17% $411,765 $25,735
    18% $388,889 $22,876
    19% $368,421 $20,468
    20% $350,000 $18,421


    Cutting and pasting from Excel creates presentation problems but I divide the $70k income by the interest rate to arrive at the required capital value. The last column shows the difference 1% improvement in yield makes in capital requirements. It highlights how important getting in excessive of 7% is. Even the difference in 4% to 5% is a jump.
    In the current low interest rate environment of 3%-4% you will need over $2mill by my rough calculations. Hope I can pick up some 20% returns from somewhere. Based on past performance I will need to look after my health as I will need to be working well into retirement.
    Last edited by Aaron; 22-04-2015 at 01:27 PM. Reason: presentation

  13. #13
    Member
    Join Date
    Oct 2014
    Location
    rural canterbury
    Posts
    434

    Default

    Quote Originally Posted by Aaron View Post
    Income Required for Financial Freedom

    Before Tax After Tax @33%
    $70,000 $52,632

    You also need capital appreciation to keep up with inflation. Otherwise, if you live for 30 years after retirement, your $70K won't go far at the end.

  14. #14
    Permanent Newbie
    Join Date
    Mar 2010
    Posts
    792

    Default

    Quote Originally Posted by satan View Post
    You also need capital appreciation to keep up with inflation. Otherwise, if you live for 30 years after retirement, your $70K won't go far at the end.
    That is even more depressing then. What if we have deflation instead. I have looked at my savings, compounding returns etc and it would be a dream to be financially free for me. If opportunities arise I can amplify my returns with debt but debt has its own risks.

    Maybe debt isn't so risky in this new age of modern finance. I read that Germany was criticised for "a fixation that money should always be repaid". I guess in these days of high finance my thinking and Germanys thinking is old fashioned. If it is my money I am lending I funnily enough expect it to be repaid, with interest. How insane is the world of finance/debt/currency getting. Common sense says that if you lend money you expect to have it repaid. Unless I suppose you work for a bank and it is someone else's money then it might not be such a problem.
    But more seriously though, this website has been reported for phishing threats. Did anyone else get this message when logging in.
    Last edited by Aaron; 22-04-2015 at 02:00 PM.

  15. #15
    Member
    Join Date
    Oct 2014
    Location
    rural canterbury
    Posts
    434

    Default

    Quote Originally Posted by Aaron View Post
    That is even more depressing then. I have looked at my savings compounding returns and it would be a dream to be financially free for me. If opportunities arise you can amplify your returns with debt but debt has its own risks.
    But more seriously though this website has been reported for phishing threats. Did anyone else get this message when logging in.
    No, I did not get a phishing message. My personal goal was a mortgage-free lifestyle property plus a million invested. I've always lived on the smell of an oily rag, all my tenants have flasher cars than me and I've never owned an i-phone etc, am a slow adopter of expensive technology and if I ever retire, I'll be the old guy in rags at the back of the company meetings eating all the sandwiches.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •