Author Topic: Australian MMMers - what is your target amount?  (Read 7751 times)

Little Aussie Battler

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Australian MMMers - what is your target amount?
« on: May 14, 2017, 10:24:30 PM »
A lot of the info available on the topic of FIRE is US-centric, which is incredibly interesting but not entirely relevant.

I know that there are a lot of Aussies on the forum, and am curious about your target amount (either income or assets)?  What SWR are people using?


kjulez_83

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Re: Australian MMMers - what is your target amount?
« Reply #1 on: May 14, 2017, 10:29:50 PM »
Hey! I am still going off 4% and not including my super in the figure so that should give me a bit of a buffer.

My target is probably 1.2M for our family of 4 (excluding super as just mentioned), so living off $48 K per year (minus tax but there would not be a lot as that is split between 2 people).

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Little Aussie Battler

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Re: Australian MMMers - what is your target amount?
« Reply #2 on: May 14, 2017, 10:42:55 PM »
Thanks!

Presumably you are basing these expenses on outright ownership of your house?

kjulez_83

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Re: Australian MMMers - what is your target amount?
« Reply #3 on: May 15, 2017, 04:47:10 AM »
Yep that's right, that is with no rental/mortgage payments.

:)

HappierAtHome

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Re: Australian MMMers - what is your target amount?
« Reply #4 on: May 15, 2017, 03:32:58 PM »
We're planning on a 4% WR, $2M in investments and a paid off house.

Of course, we're yet to have our first child (any day now...) and we'll be firing with 2-3 kids still in school. Based on our rough timeline, one in early high school and one or two in upper primary. So we will have to check spending assumptions as we go, and adjust as necessary.

Our house is on the expensive side so we will also have that additional buffer of being able to downsize after kids leave home.

Spiffsome

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Re: Australian MMMers - what is your target amount?
« Reply #5 on: May 15, 2017, 06:35:19 PM »
$1M plus paid off house. No kids. 4% WR.

God bless the public health care system.

Phryne

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Re: Australian MMMers - what is your target amount?
« Reply #6 on: May 16, 2017, 05:23:11 AM »
Hey! I am still going off 4% and not including my super in the figure so that should give me a bit of a buffer.

My target is probably 1.2M for our family of 4 (excluding super as just mentioned), so living off $48 K per year (minus tax but there would not be a lot as that is split between 2 people).

Sent from my Nexus 5X using Tapatalk

Can I ask why you're not including your super? Is it because it's too long before you'll have access?

Our expenses are similar at $49k, but we're aiming for $1.4m to include a further buffer / safety net plus update cars & a travel splurge fund
I'm not including any age pension (which my husband could be entitled to for a couple of years while we still can't access my super). Hubby's kids are already adults.

Thanks for the thread OP!

kjulez_83

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Re: Australian MMMers - what is your target amount?
« Reply #7 on: May 16, 2017, 05:33:17 AM »
Can I ask why you're not including your super? Is it because it's too long before you'll have access?

Yeah it's just to give us that extra buffer and also because I am hoping to avoid drawing down on the capital as much as possible and with only say $800K invested, the $48K we want to live on would likely require drawing down on the capital too much.

Rob_S

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Re: Australian MMMers - what is your target amount?
« Reply #8 on: May 16, 2017, 06:05:23 AM »
Target number is around $500,000 in High Yield shares (VHY) outside of super. Our target is more along the lines of needing 7700 VHY shares rather than a $ target.

Divis + franking credits will throw off enough for our family of 3 to live a good frugal early retirement in regional VIC.

In addition we currently have approx $200,000 in super that will be our buffer.

Currently debating whether to rent or buy a cheap ($300,000) home and carry a mortgage into early retirement - swapping rent money for mortgage.

No SWR. We wont touch the capital.

limeandpepper

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Re: Australian MMMers - what is your target amount?
« Reply #9 on: May 17, 2017, 12:38:05 AM »
Just for me - approximately $500k-ish as a renter, or $350k-ish with a paid-off home. I have a partner but we have separate finances. Not planning to have kids. I guess you can double the figures for what we'd need as a couple. For reference, for the past 10 years or so, my annual spending in Australia has ranged from $12k - $20k/year in varying circumstances. I also have another country I call home and can live there on less than $10k/year.

bigchrisb

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Re: Australian MMMers - what is your target amount?
« Reply #10 on: May 17, 2017, 12:58:29 AM »
I have struggled with defining a number.  Each time I got close to a number, I pushed it out further.  I set my first number back in 2007.  I'm less certain about what my number should be now, than I was then!   

However, rather than just being OMY syndrome, a significant driver has been changing circumstances.  Going from single to a married couple.  Going from no kids to having a bun in the oven.  Changes in health expectations - both costs, and ability to re-enter the workforce if I get the calc wrong.

What I'm trying to say is that I've found that as circumstances have changed, I've found it harder to estimate what my costs in FIRE are going to be. 

The in/out of super question changes a lot with age too.  My current "gut feel" is paid off accommodation plus a million invested outside super.  Then whatever is in super and the age pension are safety nets.  I'm currently 35.

I've already over-shot this.  I don't feel any more comfortable in pulling the plug, but the time has come (set for mid-Sept). 

Rowellen

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Re: Australian MMMers - what is your target amount?
« Reply #11 on: May 17, 2017, 01:19:45 AM »
Probably 1.3 - 1.4M. With a paid off home. (We're working on that). It'll probably be another 25+ years until we retire unless our income suddenly increases. Family of 4, 2 kids in primary school. We want to travel.

Anatidae V

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Re: Australian MMMers - what is your target amount?
« Reply #12 on: May 17, 2017, 03:10:13 AM »
We're aiming for $1- 1.5 million plus a paid off house, or extra $$ to cover renting. We've just started producing kids, though, so we'll see how we go. TBH we're aiming more for FI & SWAMI than full FIRE.

Phryne

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Re: Australian MMMers - what is your target amount?
« Reply #13 on: May 17, 2017, 03:13:48 AM »
Interesting re super comments- it's too much of our stash to be a buffer!

I suspect by the time I retire (in 6 years) it'll be 50%?  That said, my husband is older (& has already retired it seems...) so we'll be able to access his a couple of years after I finish.

Bee21

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Re: Australian MMMers - what is your target amount?
« Reply #14 on: May 17, 2017, 04:09:36 AM »
Finally, somebody started this conversation. Thanks guys! It is great to see some local numbers out there.

I am shooting for 5- 600k plus  some well padded super funds.  My husband thinks I am delusional 😊 but I think we can live off that 600k until we can access super and by the time we can access our super funds they should be way over 1mil, so we should be fine. Super and the paid off house plays a big part of my strategy.


kivex

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Re: Australian MMMers - what is your target amount?
« Reply #15 on: May 17, 2017, 04:36:31 AM »
We're aiming for about $3M outside of Super, however we will have to purchase a PPOR with that (i.e. move out of Sydney) and the remainder will tide us over (so perhaps $1.5M - $2M) until we can access Super. Our Super balance is currently ~$500k with 19 years until we can access so plenty of time for it to grow.

kjulez_83

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Re: Australian MMMers - what is your target amount?
« Reply #16 on: May 17, 2017, 05:50:22 AM »
We're aiming for about $3M outside of Super, however we will have to purchase a PPOR with that (i.e. move out of Sydney) and the remainder will tide us over (so perhaps $1.5M - $2M) until we can access Super. Our Super balance is currently ~$500k with 19 years until we can access so plenty of time for it to grow.

Hi kivex, interesting, so are you currently renting and planning to buy your home without a mortgage? Are you guys really high earners? I'm just intrigued as it seems like such a high figure compared to some of the others thrown around the forum :)

kivex

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Re: Australian MMMers - what is your target amount?
« Reply #17 on: May 17, 2017, 01:56:18 PM »
We're aiming for about $3M outside of Super, however we will have to purchase a PPOR with that (i.e. move out of Sydney) and the remainder will tide us over (so perhaps $1.5M - $2M) until we can access Super. Our Super balance is currently ~$500k with 19 years until we can access so plenty of time for it to grow.

Hi kivex, interesting, so are you currently renting and planning to buy your home without a mortgage? Are you guys really high earners? I'm just intrigued as it seems like such a high figure compared to some of the others thrown around the forum :)

Yes, renting in Sydney. When we hit our number we aim to leave Sydney and move somewhere regional where we can purchase a home outright.

Our stash was always large because it was intended to be a house deposit, and we had approx 50% of our intended purchase price and full stamp duty saved. The insanity of Sydney RE finally hit us when we went to auction and gave a decent offer up to our number yet were out bid by others offering crazy $. It was then that we discovered MMM and reevaluated our plans. We did the sums, some projections, put all our expenses into PocketSmith for budgeting / tracking and realised that perhaps missing out at auction could have been a good thing after all as the house deposit went to better use at Vanguard.

kjulez_83

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Re: Australian MMMers - what is your target amount?
« Reply #18 on: May 18, 2017, 06:10:06 AM »

Yes, renting in Sydney. When we hit our number we aim to leave Sydney and move somewhere regional where we can purchase a home outright.

Our stash was always large because it was intended to be a house deposit, and we had approx 50% of our intended purchase price and full stamp duty saved. The insanity of Sydney RE finally hit us when we went to auction and gave a decent offer up to our number yet were out bid by others offering crazy $. It was then that we discovered MMM and reevaluated our plans. We did the sums, some projections, put all our expenses into PocketSmith for budgeting / tracking and realised that perhaps missing out at auction could have been a good thing after all as the house deposit went to better use at Vanguard.

Cool. Yeah sounds like maybe that worked out for the best for you then. Good luck with your plan :)

Finally, somebody started this conversation. Thanks guys! It is great to see some local numbers out there.

I am shooting for 5- 600k plus  some well padded super funds.  My husband thinks I am delusional 😊 but I think we can live off that 600k until we can access super and by the time we can access our super funds they should be way over 1mil, so we should be fine. Super and the paid off house plays a big part of my strategy.

Are your super numbers already quite high? That's our current dilemma, we could be putting way more in super but we don't want too much of it locked away till we are 60 so although together we have about $275K, it won't grow that much by the time...ok I have to stop there because I just ran some numbers and even if we didn't put any more into it & assume a 7% growth rate p/a that would equal nearly $1.6M by the time I turn 60. Is that the right way to run those numbers? I used 7% to make it like 4% but adjusted for inflation...I have no idea what i'm doing though. Still, that compounding effect sure is amazing!

potm

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Re: Australian MMMers - what is your target amount?
« Reply #19 on: May 18, 2017, 08:32:59 AM »
4% nominal return adjusted for inflation would be 1%, not 7%.
Unless you mean a 10% nominal return adjusted for inflation to be a 7% real return.
That is probably a bit too optimistic with taxes and fees to consider but who knows what will happen in the next 20-30 years.

My goal is around $2 million giving around 100k of fully franked dividends. This goal is flexible depending on the state of the market at the time and yields and payout ratios of my shares.
I should also have around 400k in super at the time as well.


Nudelkopf

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Re: Australian MMMers - what is your target amount?
« Reply #20 on: May 19, 2017, 12:01:54 AM »
I don't actually have a number anymore. I'm 25, and I'm expecting my lifestyle to change a lot over the next few years. (e.g. having kids, learning to drive a car, moving out of free employer housing, moving to a less rural town). So, currently FI number is 700k... but I'm fully expecting that to change. A lot. When I was first on MMM & spent a lot more time here, I was so dead set on what my numbers would be. Now I'm older & have lived a few more years as an adult, I've stopped looking at the numbers because I can't predict the changes.

Tl;dr I don't have a clue.

Ozstache

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Re: Australian MMMers - what is your target amount?
« Reply #21 on: May 19, 2017, 12:43:41 AM »
For a couple owning our house, our core living spend (2 cars, 2 dogs) is about $35K pa and our easily-descalable major purchase/travel/reno/helping family/special event/car upgrades budget comes in at $35K pa average over 10 years, so $70K pa all up. As we have more in super than we should have, we will need to draw down some non-super assets on the run in to preservation age to achieve this, but there is plenty of contingency built in. It's all gravy once the first of us hits preservation age in 8 years time and seniors' tax offsets cut in on our non-super stash. 

kjulez_83

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Re: Australian MMMers - what is your target amount?
« Reply #22 on: May 19, 2017, 04:46:05 AM »
4% nominal return adjusted for inflation would be 1%, not 7%.
Unless you mean a 10% nominal return adjusted for inflation to be a 7% real return.
That is probably a bit too optimistic with taxes and fees to consider but who knows what will happen in the next 20-30 years.

I'm really confused about what you have said! If you say 4% = 1% and 10% = 7%, then why can't 7% =4%? Am i missing something?

I'm using a 7% real return adjusted for inflation to = 4%. As I said, I don't know what I'm doing really but all the other examples you gave were x-3=the inflation adjusted %.

givemesunshine

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Re: Australian MMMers - what is your target amount?
« Reply #23 on: May 19, 2017, 05:39:46 AM »
Glad to see this thread - some of the US living expenses are so low compared to major city living in Australia. My rent is more than some people's annual expenses!

I'm looking at 1.3M including Super - gives me $52K per year @ 4% - comfortable living expenses and lots of travel. Should be ~12-15 years away - I appreciate this is way 'more' than many on the MMM forum but we all have our preferred lifestyles! I also love my job and feel very happy to keep working until my early/mid-fifties.

itchyfeet

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Re: Australian MMMers - what is your target amount?
« Reply #24 on: May 19, 2017, 07:12:36 AM »
We will wrap up work and FIRE in the next 2 years (+/- 6 months). We will be 47 and 41 yrs old.

We should have a NW of around $3M, split between:

 - PPOR: around $750K - to be purchased post FIRE. We need to sell our house in Sydney to FIRE. We don't live there these days as we are working O.S and rent it out. We have no idea where we will move to.
 - Super: Around $850K
 - Post- tax investments: around $1.4M.

Solvent

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Re: Australian MMMers - what is your target amount?
« Reply #25 on: May 19, 2017, 01:41:44 PM »
I was thinking whatever brings me an income of around $42k a year. So perhaps $1.1 million. That is actually not assuming paid off house, but rather, it includes rental costs. This is a non-Sydney/Melbourne location. With a paid off house, the required capital would be reduced accordingly.

Still, the family may yet grow. And there are some unknowns (will I even retire in Aus?). So basically I am willing to continuously re-evaluate the number. In 5 years, when I should be essentially FI, I will of course know if my numbers are realistic or not, and whether they should be revised up or down.

Bee21

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Re: Australian MMMers - what is your target amount?
« Reply #26 on: May 19, 2017, 11:18:59 PM »
The lady at my super fund advised to calculate with a 5.5% a year annual growth (even though historically it has been making more). I am more comfortable with this number than with the 7%, but I am a pessimist.




deborah

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Re: Australian MMMers - what is your target amount?
« Reply #27 on: May 20, 2017, 01:53:37 AM »
It seems to me that people are comparing apples, oranges and bananas here. According to this article http://www.smh.com.au/business/markets/the-sorry-state-of-returns-from-superannuation-funds-this-year-20160701-gpwk3e.html superannuation funds have been returning an average of 7.1% a year.

HOWEVER

If you look further, that is actually less than CPI plus 3.5% - remember, the return doesn't give the current value (minus inflation), and I suspect it also doesn't include tax on income.

Then, if you look at this http://www.industrysuperaustralia.com/assets/Reports/Long-Term-Superannuation-Investment-Performance-Update.pdf you see that returns of 4.18% are quoted over the 16 years that super funds have really been going.

Anyone who bases their plans on higher returns is asking for trouble.
« Last Edit: May 20, 2017, 02:08:02 AM by deborah »

kjulez_83

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Re: Australian MMMers - what is your target amount?
« Reply #28 on: May 20, 2017, 06:55:01 AM »
It seems to me that people are comparing apples, oranges and bananas here. According to this article http://www.smh.com.au/business/markets/the-sorry-state-of-returns-from-superannuation-funds-this-year-20160701-gpwk3e.html superannuation funds have been returning an average of 7.1% a year.

HOWEVER

If you look further, that is actually less than CPI plus 3.5% - remember, the return doesn't give the current value (minus inflation), and I suspect it also doesn't include tax on income.

Then, if you look at this http://www.industrysuperaustralia.com/assets/Reports/Long-Term-Superannuation-Investment-Performance-Update.pdf you see that returns of 4.18% are quoted over the 16 years that super funds have really been going.

Anyone who bases their plans on higher returns is asking for trouble.

Thanks for those articles/figures. Cool ok, so makes sense now, 4% it is then!

I get you now potm, I had my numbers the wrong way around!! (◔_◔)

itchyfeet

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Re: Australian MMMers - what is your target amount?
« Reply #29 on: May 20, 2017, 08:08:05 AM »

Then, if you look at this http://www.industrysuperaustralia.com/assets/Reports/Long-Term-Superannuation-Investment-Performance-Update.pdf you see that returns of 4.18% are quoted over the 16 years that super funds have really been going.

Anyone who bases their plans on higher returns is asking for trouble.

Thanks for these articles Deborah. Very interesting reading. The performance of retail funds is embarrassing.

That said, I would challenge your conclusion that "Anyone who bases their plan on higher returns is asking for trouble". In the report you shared it also shows that equities far outperformed super funds. So why not start a SMSF and achieve the same outcome as a pure equities investment yourself. And, of course the period in the report was one in which equities under performed.

The long term investing report of the ASX presents a far rosier picture

http://www.asx.com.au/documents/research/russell-asx-long-term-investing-report-2016.pdf

If you look at the 20 after tax returns on page 7. For Australian equities invested inside super for the past 20 years, the annual return has been 9.1% pa, with average inflation over the period at 2.5%.

 So Australian equities have netted 6.6% above inflation over the past 20 years, if that was how your super was invested.

Residential Property did even better. But, I can not fathom this continuing. I don't have a crystal ball, but I do have a strong belief that Australian equities will out perform Australian residential property over the next 20 years.

Bee21

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Re: Australian MMMers - what is your target amount?
« Reply #30 on: May 20, 2017, 02:32:30 PM »
Thanks Deborah. It was an interesting read.

@#$/^, my fund performs much better than my husband's.  And he refuses to move his over. At least it makes me feel better about salary sacrificing aggressively.

Guys, do you think it would be possible for us oz people to have a dedicated section around here, not just a few random threads? Reading about these us strategies is confusing and misleading, while I always find the aussie threads enlightening.

deborah

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Re: Australian MMMers - what is your target amount?
« Reply #31 on: May 21, 2017, 02:01:55 AM »
You're right Itchyfeet, I was being a bit over the top. People were making sweeping statements about very high returns that just haven't been there over time. Let us look at some of the foundations for saying that people expecting high returns are asking for trouble.

The long term Australian SWR is 3.6% or 3.8% rather than the 4% that is usually quoted, and I have always looked at 4% as being a bit of an anomaly for the US anyway as EVERYWHERE else has a lower SWR from all the studies Wade Pfau has done comparing those for different countries. Ours is lower because of a series of bad years in the stock market in the 60s. Sure, 100% equities tends to work out a bit better than the 60/40 scenario that SWRs are calculated on, but there are also extreme cases of failure with 100% equities. To expect superannuation (which has an extra layer of administration) to have higher returns is a little unreasonable.

The ASX is a bit difficult to work with because franking credits started in the late 80s and since then equities have behaved differently to how they did beforehand. Also, since the GFC many people have been talking about investments having a long period of lower returns - but they are also all saying that (probably) your generation is never going to be able to afford a house. People tend to look at the current situation and expect it to last forever, and that is not the case. Things change, sometimes quite dramatically, and everyone's assumptions go down the drain. I suspect that both statements are going to prove to be wrong, even though they are both correct now.

Finally, Bee21.

I would dearly like us to have an Oz section. It has been asked about before, and it was a no go. There are an enormous number of people from the US on the forum. A couple of years ago I looked into who read MMM (you can't work out easily where people in the forum itself are from, but you can for the MMM readers). From memory something like 80% were from the US. There were an exceedingly high number of Canadians - maybe 15%. We came in pretty low. What was interesting was that Australia had quite a high penetration rate - about half that of Canada - which would put us at about 5% of MMM readers, since we have 2/3 the population of Canada. The moderators were quite amazed at how high the numbers were for Canada and Australia, but even then it was still a no go.

It gets a bit frustrating when someone starts an Australian thread (like the one a while ago about housing in Australia), and some know-it-all from the US completely kiboshes the thread. However, that has only happened a few times. If you put Australia in the title, a lot of us manage to flock to it, and we have good discussions.

itchyfeet

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Re: Australian MMMers - what is your target amount?
« Reply #32 on: May 21, 2017, 10:24:14 AM »
Thanks for the thoughts Deborah. I hear what you are saying about the last 100 years being particularly successful for both Australia and the US, and thus maybe not appropriate as a benchmark going forward.

I would agree with this comment in so far as it relates to average returns ie: average share market returns in the 20th century were quite exceptional due to a number of factors, and there is a fair chance that future average returns will be lower than the past.

But for retirement average returns don't need to be anywhere near as high a historic levels for a 4% WR to allow the stash to last 30 years.

The bigger issue versus history is the sequence of returns. In the 20th century there were events that caused periods with very bad sequences ie: great depressions, world wars, stagflation etc. the question for me is not whether average returns will match the 20th century, but what I can do to minimise the impact of a bad sequence of returns.

Lower future average returns don't necessarily equate to a lower future safe withdrawal rate.

My belief is that I'd be unlucky if a 4% withdrawal rate failed, but it is certainly possible if I draw down blindly & mechanically. It's Unlikely, but possible.

To mitigate the risk I could increase my stash further, but I have decided not to.

In my case about half of my planned withdrawals are needed to cover day to day living costs. The other 50% is for travel, new cars, major home repairs and other costs that could be delayed a few years if need be. I will also hold some cash, and receive some income from rent, to provide even more flexibility in the face of a market drop.

I am willing to stay optimistic that the day I FIRE will not be the worst day to retire in the past 120 years. But I am ready to react in case I am unlucky.


deborah

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Re: Australian MMMers - what is your target amount?
« Reply #33 on: May 21, 2017, 02:43:40 PM »
Back to the original conversation. I have been retired for 7 years. I spend $28000 a year on everything except overseas travel, which is totally discretionary. Like Ozstache, I have more than I need, because I didn't realise you COULD retire early. That I did was because a financial adviser convinced me that I already had enough to retire, after I convinced him that my spending numbers were correct  (he initially couldn't believe that I could live on that amount, but I had 5 years of figures that proved that I did).

I never thought I would travel overseas in retirement (I didn't while I was working), and although I really like where I've been, I could give it up tomorrow without any qualms. But, I have the money, and the world is an amazing place.

alhart345

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Re: Australian MMMers - what is your target amount?
« Reply #34 on: May 24, 2017, 11:45:50 PM »
Great to see so many put their numbers in, location also helps.

Perth, paid off house, 44 and wife 40, two kids, planned spend 40k starting 2018, stash is 1M outside super and 100k in super.

I find the percentage approach does not satisfy my itch.  Lately, I like to look at distributions per unit and work back from there.  I am looking for stability, patterns, I take out any peaks or even excessive lows, and then set a target.  For me, 7 cents per unit for Vanguard's Australia Shares Index, around 3.3% makes me feel safe.  With franking credits, and spread over two filers, 1-1.2m invested is the target.

Year Ending   Index Fund (CPU)
31/06/2008    11.23
31/06/2009    7.07
31/06/2010    6.42
31/06/2011    6.77
31/06/2012    6.93
31/06/2013    7.65
31/06/2014    8.55
31/06/2015    8.46
31/06/2016    9.71
   
TOTAL    72.79
   
Average    8.09
   
Average without peaks    7.69


nnls

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Re: Australian MMMers - what is your target amount?
« Reply #35 on: May 25, 2017, 12:28:41 AM »
I am still trying to work out my number, I aim to have a paid off house. My expenses last year minus mortgage was a very spendy $45k, but than included an 8 week overseas holiday. So hopefully this year can be a little better.

I am currently 29 and single

I am still not good at flexing my frugal muscles but I am hoping about $1 million outside of super. Though I am still a long way off, so at this stage I am more focused on getting better at saving money and not living such a spendy lifestyle.

urbanista

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Re: Australian MMMers - what is your target amount?
« Reply #36 on: May 25, 2017, 01:33:24 AM »
You're right Itchyfeet, I was being a bit over the top. People were making sweeping statements about very high returns that just haven't been there over time. Let us look at some of the foundations for saying that people expecting high returns are asking for trouble.

The long term Australian SWR is 3.6% or 3.8% rather than the 4% that is usually quoted, and I have always looked at 4% as being a bit of an anomaly for the US anyway as EVERYWHERE else has a lower SWR from all the studies Wade Pfau has done comparing those for different countries. Ours is lower because of a series of bad years in the stock market in the 60s. Sure, 100% equities tends to work out a bit better than the 60/40 scenario that SWRs are calculated on, but there are also extreme cases of failure with 100% equities. To expect superannuation (which has an extra layer of administration) to have higher returns is a little unreasonable.

Wade Pfau assumed 1% funds management fees. Cut that number in half (very easy to do) and SWR can be like lifted from 3.6% to 4%.
« Last Edit: May 25, 2017, 03:09:45 AM by urbanista »

urbanista

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Re: Australian MMMers - what is your target amount?
« Reply #37 on: May 25, 2017, 03:26:51 AM »
Then, if you look at this http://www.industrysuperaustralia.com/assets/Reports/Long-Term-Superannuation-Investment-Performance-Update.pdf you see that returns of 4.18% are quoted over the 16 years that super funds have really been going.

Anyone who bases their plans on higher returns is asking for trouble.

It is 4.81%, not 4.18%. And this number is heavily biased by enormous fees that retail super funds charge. It is common to be charged 2-2.5% when all the fees are taken into account. FIRE folks, I want to hope, know better than keep their super in retail funds. Industry super funds have done much better than 4.81% long term.
« Last Edit: May 25, 2017, 03:36:38 AM by urbanista »

Adram

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Re: Australian MMMers - what is your target amount?
« Reply #38 on: May 25, 2017, 07:29:48 AM »
I think we'll be FI at $750K with a paid off house, but hoping to get closer to 1 million for an extra buffer. Might downsize once we hit the $750K mark which would get us pretty close. Plus i don't include super in my calcs.

42 now so hoping to get it done by age 50. Reckon we can earn ~ $20K between us with part-time work after RE anyway, so really we could probably do it on $250K, if we wanted to live on a knife edge 😃

marty998

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Re: Australian MMMers - what is your target amount?
« Reply #39 on: May 26, 2017, 09:04:11 PM »
I'm with nudelkopf on this. I'm 5 years into MMM and I still have no idea how much I'll need.

Cash generation from investments is a problem - property is negative and we're in a sweet spot for yields on shares courtesy of the banks which is unlikely to continue forever without some sort of disruption.

Getting taxed on investment income while you are still working also bites hard!

My guess is that I'll probably end up with too much, but without a family at the moment it's impossible to tell.

Right now I have $750k of investment property loans that have just been switched to P&I to avoid the latest round of interest rate hikes. Cash outflow on those is approaching $4k a month.

So it's a case of building lots of equity, but not having much in the way of free cash flow. I still don't have a cheap answer to it yet :/


itchyfeet

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Re: Australian MMMers - what is your target amount?
« Reply #40 on: May 26, 2017, 11:54:32 PM »
I'm with nudelkopf on this. I'm 5 years into MMM and I still have no idea how much I'll need.

Cash generation from investments is a problem - property is negative and we're in a sweet spot for yields on shares courtesy of the banks which is unlikely to continue forever without some sort of disruption.

Getting taxed on investment income while you are still working also bites hard!

My guess is that I'll probably end up with too much, but without a family at the moment it's impossible to tell.

Right now I have $750k of investment property loans that have just been switched to P&I to avoid the latest round of interest rate hikes. Cash outflow on those is approaching $4k a month.

So it's a case of building lots of equity, but not having much in the way of free cash flow. I still don't have a cheap answer to it yet :/

I agree With everything you say here Marty.

If you have a high earning job, and hence a high marginal tax rate, you need to seek out tax advantaged ways to invest. Super is the best tax break and Not exactly helpful for FIRE.

(Although, for now I am working in the Middle East so am in the perfect tax setting :-D ..... for now...)

We also have a lot of property debt in Australia. Our 5 year interest only loan is fixed and still has nearly 3 years left to run. At the end of that we will see what we can negotiate. Things might be quite different 3 years from now.

marty998

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Re: Australian MMMers - what is your target amount?
« Reply #41 on: May 27, 2017, 12:30:53 AM »
If you have a high earning job, and hence a high marginal tax rate, you need to seek out tax advantaged ways to invest. Super is the best tax break and Not exactly helpful for FIRE.

(Although, for now I am working in the Middle East so am in the perfect tax setting :-D ..... for now...)

We also have a lot of property debt in Australia. Our 5 year interest only loan is fixed and still has nearly 3 years left to run. At the end of that we will see what we can negotiate. Things might be quite different 3 years from now.

Without working in the Middle East, depreciation on investment properties is the best legal rort going around :)

itchyfeet

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Re: Australian MMMers - what is your target amount?
« Reply #42 on: May 27, 2017, 01:53:50 AM »
Yes, and capital gains tax at 50% of your marginal is not bad either, particularly if you can manage the timing of the sale right post FIRE.

marty998

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Re: Australian MMMers - what is your target amount?
« Reply #43 on: May 27, 2017, 05:12:51 PM »
I think we'll be FI at $750K with a paid off house, but hoping to get closer to 1 million for an extra buffer. Might downsize once we hit the $750K mark which would get us pretty close. Plus i don't include super in my calcs.

This was ballpark my original thoughts... paid off house +750-800.

I'm a few years away from that, and will have some decisions to make when I get there to restructure the portfolio without incurring too much in the way of CGT.

Julard

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Re: Australian MMMers - what is your target amount?
« Reply #44 on: May 28, 2017, 01:28:30 AM »
I'd love to get to $1,000,000 plus a paid off house, but I'm not certain I'll make it.  My goal is to be able to retire no later than 60 in a house that I own. 

Even if I don't get to what I'd like, the intent of the plan can be achieved. I just wouldn't be buying a house where I am now (too pricey).  That wouldn't be the end of the world, and could actually serve a double purpose: if the kids don't show an appropriate inclination to move out come the time, I can move to the country to get away from them.

Excluding rent, the kids and I have lived on around $36,000 p/a the last two years, including car and medical expenses last year and a $5,000 holiday this year.  So $40k a year for me on my own would be pretty luxurious, and I could probably be quite happy with less if needed.

As someone noted earlier - we should all be appropriately thankful for our healthcare system.
« Last Edit: November 01, 2017, 02:42:42 AM by Julard »