You may be enjoying your current lifestyle, earning a good income, paying off the mortgage as well as having a little left over to enjoy the finer things in life. You could say you are “living the dream”.
While you may be enjoying your lifestyle now, have you thought about what steps you might take in order to sustain your current standard of living in your retirement years, without your employment income?
Working hard to build your wealth is an important part of creating the lifestyle of your choice and achieving financial independence. It is important to consider how you will continue to fund this standard of living when you have retired.
The key to maintaining your current standard of living in retirement is to have a capital base that can provide a passive income or investment return.
The AFSA Retirement Standard recommends that a couple will need $59,160 per year to support a “comfortable” retirement.[1] Based on a 5% return, you would need a capital base of $1.2 million to be able to generate a passive income of $60,000 per annum. This recommended amount for achieving a comfortable retirement also makes the assumption that you own your own home outright and are relatively healthy.
A comfortable retirement lifestyle enables healthy retirees to be involved in a broader range of leisure and recreational activities with a good standard of living associated with the ability to purchase household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel. [2] While a comfortable lifestyle is indicated at $43,062 for a single and $59,160 for a couple per year, how does this compare to your current lifestyle? There is every chance that the lifestyle you are accustomed to as an income earner is considerably more expensive than what is considered a comfortable lifestyle in retirement.
Unless you are prepared to dramatically reduce your current standard of living when you retire, you may need a greater capital base to generate the returns that you will need.
If you would like to achieve the retirement of your dreams, you may need to start planning now. To learn more about how you can continue “living the dream” in your retirement years, I encourage you to contact our office on 07 3720 1299 or email admin@wealthfundamentals.com.au to discuss wealth building strategies appropriate for your circumstances.
1. https://www.superannuation.asn.au/resources/retirement-standard
2. ASFA http://www.superannuation.asn.au/resources/retirement-standard
Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. Wealth Fundamentals strongly suggests that you should not act on it without first obtaining professional advice specific to your circumstances.
This publication cannot be reproduced in any form without the express written consent of the author.