How much do I need to be able to retire?

How much is enough?

You’re at or nearing retirement and you’re obviously keen to enter this phase of your life feeling comfortable about the future. There’s one question you want answered with confidence – Have I got enough to live happily ever after?

Unfortunately, there’s not a straight forward answer to this relatively simple question. There are many rules of thumb used – these generally range between 12 to 25 times your expected annual retirement spending. Yet, the amount you need is dependent upon your specific retirement goals.

What are your retirement goals?

Primarily, most people’s retirement goal is to ensure that they don’t run out of money. However, you may also want to leave some wealth to your children or other beneficiaries of importance. You may find that you have to curtail your own spending to achieve this. The last thing you want to find out is that you’ve under spent and left too much to your estate.

Your ultimate aim is to reach your target wealth at just the right time. Unfortunately, there are a number of uncertainties which make achieving this aim a far more difficult task than it appears.
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Building your exposure to shares and property

Two approaches to building investment wealth …

We see two common approaches to building investment wealth and, particularly, exposure to growth assets (i.e. shares and property) among couples in their thirties and early forties. These people have generally borrowed to purchase a residence, with all or most available cash being consumed by the mortgage and meeting the expenses of raising what may be a growing family.

The first approach we will call “conservative”, even though we don’t really think it is. It involves directing all savings, except perhaps superannuation contributions, to repayment of the mortgage. There is no deliberate increase in growth asset exposure until the mortgage has been cleared and surplus cash is available to buy shares or property, either directly or via managed funds. It is viewed as imprudent to invest in risky growth assets before all debt has been repaid.
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