Are my spreadsheet formulas calculations correct?

[davidjm]

Hi All

>>moved from another forum

I am late to the party being 61 and did not contemplate about retiring early until I started reading all about FIRE and the various calculators out there.  That and also my ultra-conservative Wife who wishes to have enough to retire on stopped any thought of retirement.  I have now convinced her I do not need to work to 67. :)

Anyway, I would appreciate it if anybody could take a look my calculations in the spreadsheet and check they are correct.
I am aware of past history is not a guide for the future and that calculations such as inflation etc play a big part.  We will live with the philosophy of adjusting our lifestyle based on the market.

A quick caveat, this is using the Australian Super retirement income stream and it does show we will run out of funds in about 15 years. However, we have about another 1 mil in a few year's time from selling off assets (less CGT) which we will invest in shares.

cheers

Dave

https://docs.google.com/spreadsheets/d/1kTPZeR1b-vNHj4PwdAUfYa5mWuGqT8aHvQbIUdvl6RE/edit?usp=sharing

[Gremlin]

Welcome @davidjm

Aussie here so might be able to provide some perspective.  I have a couple of comments:

Your maths appears to hold up, assuming those returns.  One thing with using actual returns to imply future returns is that it's very dependent on what time period you use.  If you retire tomorrow and then the market tanks the day after then that's going to lead to a different outcome to if next year booms.  So it's right what you've done.  But also wrong because future returns won't be exactly that.
On the face of it, drawing $90k a year from a balance of $1.2m will draw down your super in that 10 to 20 year time frame, but there are a few saving graces for you
$90k per annum for a couple is more than most on this forum would spend in retirement, especially if you own your own home.  Can I suggest posting a case study on your expenses?  Expenses in retirement are often less than when working.  If you find that your expenses in retirement are $70k, not $90k that makes a huge difference to the outcome
Does your wife have super?  Or a pension?  Is the $1.2m combined or just you?
That 'other 1 mil' in a few years time.  Read up about after-tax contributions to super.  If you can get that money into your super or your wife's, then you'll likely pay little to no tax on future earnings once it's there.  That may save you a lot and, again, can change the outcome
If you do deplete your funds, you may also be able to access the aged pension.  Bear in mind, this is probably a safety net, rather than a lifestyle enhancer.  It's currently in the order of ~$39k for a couple at the maximum rate.  If you get 'used' to living off $90k, that's going to be a fair shock

Good luck with the thinking.  Happy to critique your retirement budget if you put it up.

[deborah]

You're withdrawing more than the minimum required by superannuation each year, so that's good. I'm surprised by the returns you're expecting each year - are you sure they're reasonable. It appears that the last column isn't used - is that right?

You might be better off looking at the retirement calculator in moneysmart on the how much super you need page - https://moneysmart.gov.au/grow-your-super/how-much-super-you-need

It's deceptively simple, but it has advanced settings which include changing inflation and a number of other settings. It also includes the old age pension if and when the super balance reduces to the level where that would kick in.

[davidjm]

Hi Both

Thanks, Gremlin
Here is our spending pattern link.  There is no way we can survive on $60k+ as suggested by retirement sites.  :). However, as we get older our spending requirements will drop accordingly, not just yet.
https://docs.google.com/spreadsheets/d/1qnMOq4M2NE9fY_Yt3Qtzd8VTeCZAyJkzJ61bCSzzgkw/edit?usp=sharing
Our super is combined and is already maxed out with the bring forward rule.
We also have no debt and own a 1.5 m PPOR which eventually we will downsize when I can no longer walk up the stairs :)

Thanks, Deborah
The last column is just the average for balanced fund returns across the industry super funds. I'll check that link.

cheers

[Gremlin]

Hi David,

It's great that you track your historical spending, but I would also recommend doing a 'retirement budget'.  When you no longer work, your expenses DO change.  Obviously work expenses go, but you'll also typically have less car usage, less need for tolls, fuel, etc.  I'm guessing from some of the values in your spreadsheet that you've got two cars?  Critique whether you think you can live with 1 only in retirement.  The odd Uber or taxi here and there on the odd occasion when you need a second car may be far, far cheaper than insurance, rego, petrol, maintenance etc on the second car.  It may save you thousands a year.

You've spent $68k in 6 months, so even getting expenses down to $90k a year is going to be challenging (and, being direct, I wouldn't feel comfortable retiring on $90k a year with only $1.2m, notwithstanding more that might be able to flow in later).  I'd recommend trying to live at that level of spending for at least 6 months prior to retiring, just to be comfortable knowing you can do it.  If you can't, then you possibly need to ask yourself some difficult questions.

There's a few things that stand out as expensive to me and you may be able to get something equally satisfying for less money. (Also, I'm guessing from some of the labels on your spending table, that you live near me - eg RACQ, Steve Jones - so I have some idea of the costs in this area)

Mobile/Internet.  We spend about $175 a month on internet (100MB NBN plan) and four mobiles for the family.  We probably have some room to cut in our budget here as well.  If you can get away with a pre-paid plan, Catch and/or Kogan are both reasonably priced for mobiles.  In comparison, you're spending $250+ a month and I'm guessing that includes 2 mobiles only?

Squarespace - will this stay, post retirement?

Discretionary lifestyle expenses.  Alcohol, gym, beauty, entertainment, eating out and streaming all add to a very substantial amount.  This may be the lifestyle that you want, but it may not be sustainable in retirement.  Some suggestions - Grays Online for wine and occasionally spirits (not always super cheap, but when you get a bargain, it can be a great one).  Or taking up home brewing, if beer is your thing.  Home gym as opposed to gym membership (or buy a bike or good trail shoes as there's great trails in the area).  Cycle through subscription services and binge the one platform for a period rather than having multiple at once.  Be strict about a budget for eating out and entertainment and keep to it month to month.

Holidays.  Not sure what you are getting for your Trip A Deal, but you might find you are better off trying to build a holiday yourself.  I'm in the process of organising a month in US and Europe for our family of four over Christmas (so expensive time to travel) and our total budget is going to come in at around the same as your Trip A Deal.  When you're not constrained by work time, you can put in a bit of effort to organising holidays and it can bring costs down significantly.

Also, I'd suggest you should genuinely think about whether you'll be able to cut expenses as you get older.  You are already spending a very significant amount on medical.  Don't underestimate how this may grow in your twilight years.

Good luck with this.  Feel free to checkin here as we are all a friendly bunch and we help keep each other on track.

[deborah]

I understand that if you sell your house and you've had it for more than 10 years, both you and your wife (if she's over 60) can put $300,000 each into super, so you won't need to leave all of the $1,000,000 outside super even if you're over the limit.