Australia - Retirement scaremongering in the media

[wesley]

http://www.smh.com.au/money/super-and-funds/1m-savings-for-retirement-may-not-be-enough-20140318-34yme.html

had to post this article from Australia, for those who can't be bothered cicking:


The Australian Securities and Investments Commission's Money Smart retirement planner shows a home-owning couple with $1 million at age 65 could expect an annual after-tax income of $61,000 a year until they reach age 90.

The bottom line is even $1 million may barely be enough for many people. Some will come into an inheritance and some may free up some of the capital they have in their homes by downsizing. But closing the retirement savings gap - the difference between the expectations we have for retirement and what we will save - will not be achieved by compulsory super alone.

Read more: http://www.smh.com.au/money/super-and-funds/1m-savings-for-retirement-may-not-be-enough-20140318-34yme.html#ixzz2wbe6YJ7O

[Ftao93]

I think that's reasonable for non-mustachians, those who must buy a new car, 3 homes, 14 quilting machines never eat at home, and can't possibly cut back on $150/mo cable bills.

Please excuse the segue:

Even in our current state, which I call "a little too loose with the cash", we don't even GROSS 61k (adjust for USD rate) and we're still putting away a minimum of 10k a year.  This will increase rapidly.

My in laws are nearing full retirement.  Dad's career ended a few years early due to Parkinson's, and Mom doesn't make a mint or anything.  But their house is paid off, they invested well, own 1 car they hardly drive, and everything is going along OK.   Mom is freaking out just a bit due to going on a fixed income, but I think they have it planned out really well, and will probably leave us a little something (or maybe even their condo) when it's time for them to leave this world.

My father and I were discussing financial matters over Brunch the other week.  I asked him how he'd built up so well.  He said to me:

"I didn't save a dime til I was your age (37).  I drank, smoked, and otherwise pissed away 3x my income, your college fund, and savings your Mom and I built.   But once I got stable, we bought a house, saved a ton, and didn't bother with too much excess.  When I retire in 2 years I don't plan on spending half of what I do now.  We should be able to leave you and your stepsiblings at least a little something."

So, even if you don't save until you're nearly 40, you can still pull it off.   Both sets of parents have done well, but don't have $1m in assets, and they don't seem too worried about it even if they live to 90.

[wesley]

It depends on what you are doing with the 61k - if your house is paid off, healthcare is covered (Aussies had great free healthcare and cheap private) you should still have 55AUD/50US each year after accounting for council rates, insurance on home and car and private healthcare.

Or draw down a fixed 6% each year from the Million. happy days.

[golden1]

What drives me nuts about a lot of those articles is that they view retirement as a "choice" people make.  In many, many cases, in my experience, I see people who are being aged out of careers due to their health, lack of skills in newer markets, etc...

In the tech world, I see a lot of people who get laid off in their late 50's, early 60's and struggle to find full time employment for years, so they will live in semi-retirement until age 62-65 working part time to make ends meet, and then they start getting social security. 

I know only a few people who chose to retire at a certain age and were able to follow through on it. 

[Jamesqf]

The Australian Securities and Investments Commission's Money Smart retirement planner shows a home-owning couple with $1 million at age 65 could expect an annual after-tax income of $61,000 a year until they reach age 90.

$61,000 AUS = $55,437.09 US, per today's exchange rate.  Seeing as how I live quite comfortably spending under half that, AND my spending includes a bit over $12K/year mortgage payment (which will be gone around conventional retirement age), I'm not too bothered :-)

[NumberJohnny5]

$61,000 AUS = $55,437.09 US, per today's exchange rate.  Seeing as how I live quite comfortably spending under half that, AND my spending includes a bit over $12K/year mortgage payment (which will be gone around conventional retirement age), I'm not too bothered :-)

Ah, exchange rates. This time last year, the AUD was worth more than the USD. For budgeting purposes, I consider the two equal (sadly, the currency exchange companies don't support my view).

We have a family of five, bringing in less than that amount (including Centrelink's Family Tax Benefit). If you take out the extravagant vacations and our retirement spending, we spend waaaaaay under half that amount.

I dunno, maybe our standards are too low.

[happy]

One has to wonder what the point of the article was. It certainly trotted out 2 of the favourite media themes: save more super and see a financial planner. So whats new?

61k may not sound enough to the average man on the street, but I think many people still working (like the author) don't fully appreciate that once the cost of family is gone, how much spending declines.

Of course to a Mustachian 61k is way more than is needed. Simple living doyenne, Rhonda at Down to Earth blog, says she and her hubbie are saving money on the Old Age Pension (32K for a couple).

[Melody]

My luxurious single in the city life (Perth) sets me back $33k/yr including rent in a trendy neighborhood and the costs of car ownership - holidays this year have/will have included sydney, singapore and 6 weeks in the USA. $61/k per year for a home owning couple seems like heaps!

[zarfus]

This is funny:
"The Association of Superannuation Funds of Australia's Retirement Standard estimates a home-owning couple needs almost $58,000 a year for a ''comfortable'' retirement."

Thanks, but I don't need an association to tell me how much I need to spend for what level of comfort i want?

[wesley]

My luxurious single in the city life (Perth) sets me back $33k/yr including rent in a trendy neighborhood and the costs of car ownership - holidays this year have/will have included sydney, singapore and 6 weeks in the USA. $61/k per year for a home owning couple seems like heaps!

That does sound like a luxurious life - Now if you had a paid off house the difference in rent would cover health (retirement age - you need it) and more holidays..

[Melody]

Especially when a retired couple would get economies of scale (e.g. one car between two) and not have the costs of working to contend with.

[stripey]

My luxurious single in the city life (Perth) sets me back $33k/yr including rent in a trendy neighborhood and the costs of car ownership - holidays this year have/will have included sydney, singapore and 6 weeks in the USA. $61/k per year for a home owning couple seems like heaps!

That does sound like a luxurious life - Now if you had a paid off house the difference in rent would cover health (retirement age - you need it) and more holidays..

+1 to Melody

(Me- Perth, in twenties, $25 - $30k which includes rent and a fair bit of extravagance including several thousand dollars to what I would consider worthwhile causes and charities and overseas trips too)

[deborah]

Yes, it is/was a quite ridiculous article. I expect a couple of ferociously expensive years, this financial year and next - teeth (this is going to cost big time - this year and next), car (it has already cost me 7 times its worth this financial year), buying a very expensive toy (pity I didn't know the car was going to cause problems). Next year is something I have been planning to do for the past 15 - I won the Gallipolli draw - and got a ticket - but the trip will be very expensive.

But, no way am I going to spend the amount of money this article suggests in either year. How can people spend that much? Don't answer me - I realize I know several people who probably spend that much a month.

[quilter]

If you take their advice and get a financial planner you will need more than that because then you have to pay the financial planner.

There is no one size fits all no matter what country you live in. As a matter of fact, there are many many people in this world who would consider themselves wealthy if they could only attain what the most mustachian of us have.  We are drowning in luxury, overwhelmed with consumer goods and food and gadgets.

[Lukim]

I agree that $1m at age 65 is insufficient to retire as you cannot rely on the Australian government to maintain you in old age.

I think anything less than $2m will be insufficient for an enjoyable retirement free of stress and worry.