cerebus
Honorary Master
Based on today's values (discounting inflation), what would you consider an adequate monthly retirement nett income to be? How do you break your amounts down?
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Early retirement - Discussion
- Thread starter Neo_X
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Based on today's values (discounting inflation), what would you consider an adequate monthly retirement nett income to be? How do you break your amounts down?
Shayd
Expert Member
Retirement tends to be a very personal journey. There is no 1 size fits all. Some people have enormous salaries and yet spend pretty frugally others consumer everything like bacteria.
I have sat with clients who have salaries over 50k nett but their expenses after the bond and children costs are removed are somewhere around 10 to 15k. They don't need anywhere near 75% to retire.
Then there are those who spend 2k on wine alone per month. These tend to get a shock when they retire.
To get an idea what you really need. Draw up a budget. Remove all debt expenses. Remove all childcare expenses. Then see how much you spend, this is very similar to what you need for retirement.
You might be surprised how little it actually is. For the cast majority of us the bond, car repayment and child care expenses are the bulk of our costs.
If you are still paying a bond or car when retired you have made some larger errors in judgement.
Shayd
Expert Member
People seem to wildly misunderstanding the MMM philosophy. He doesn't advocate getting to "retirement" then sitting in a corner spending as little as possible until you die.
He advocates keeping expenses as low as possible, saving a big chunk of cash until your expenses are passively paid and then doing stuff that stimulates you. This can very often be stuff that makes you money. But unlike a job you have to have, you can do it when or where you want.
Imagine only taking a job because it sounds interesting or because you wasn't to pay for something wasteful that you don't need. This would be a lot more interesting way to spend life.
It is my goal to get there by 40. And then try stuff out just because it is interesting or challenging.
He advocates keeping expenses as low as possible, saving a big chunk of cash until your expenses are passively paid and then doing stuff that stimulates you. This can very often be stuff that makes you money. But unlike a job you have to have, you can do it when or where you want.
Imagine only taking a job because it sounds interesting or because you wasn't to pay for something wasteful that you don't need. This would be a lot more interesting way to spend life.
It is my goal to get there by 40. And then try stuff out just because it is interesting or challenging.
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I can tell you now I don't have 10m and I'm under 40. Lets see if I can prove that rule wrong.
SauRoNZA
Honorary Master
Well if you aren't paying a bond and not driving a crazy car then 25k is a whole lot of money to survive on.
Remember that the idea here is being financially free aka not needing to work. It doesn't mean that you can't still make some money on the side it just means that you don't NEED to make money to live a happy life.
But if your lifestyle is to have 50k a month in disposable cash and blow it on cars, cocaine and strippers...then this plan is probably not for you.
cerebus
Honorary Master
Yeah I sat down and did some napkin calculations the other day and on current costs of living, minus children and bond payments, I think 15k nett would leave us in relative luxury, with a big cushion every month, holidays twice a year, an amortized car payment (I think 1 car every 10 years is fine) and medical aid and the same eating standard that we have now which I consider to be very good.
SauRoNZA
Honorary Master
Yup and you can very happily do that with 25k a month if you don't have other expenses. Jeez you could do it with even less I'm sure.
A quick reverse calculation...
25k * 12 = R300 000 a year.
Which means you need R3 million in the bank making 10% per annum to sustain that. Of course that is not calculating for tax so the R5 million mentioned earlier seems just about right.
Problem is you'll need to be putting away R15k a month right now for the next 10 years and adjusting with inflation and guaranteeing 10% interest to almost reach R5 mil.
15k isn't all that much if you offset it against what you are putting into your RA/Pension now already and adding a little bit too it, but then you have no money for real retirement again.
Doesn't matter how frugal I am there is no chance in hell I can pull 15k out of a hat even from a HOUSEHOLD income point of view. Nevermind increasing that 15k annually to compensate for inflation.
Personally? I'd want around 50k a month minimum. Assuming my bonds are paid off.
I want to be able to enjoy retirement, not sit at home counting pennies and looking for ways to save, I also don't want to end up in same dodge retirement home.
I had grandparents on both size of the spectrum - one earning a pension of no more than R3000/pm for two - and one, still alive, with a pension of R75k... oddly enough - she doesn't do much with it except invest - but - when she wants to do something, she does it.
If retirement to someone is just about surviving until death... well - enjoy. Hope you don't end up needing public health care.
You also need to have funds for the unplanned, and as you get older, the chances of you getting sick, etc - become far greater.
Maybe as a hobby to sum - but when I retire - I want to do so knowing I don't have to worry about money again... if I one the US lottery of a few hundred million, I'd retire... I have no real reason to "yearning" to work. I'd much rather be exploring the world.
Out of interest, what are the plans for retirement when you reach an age where you need assistance?
I was looking at some of the places for my grandmother - the really upper market retirement villages or complexes with frail care, etc are in the region of R3.5m+ (i.e. your last stop)
I was looking at some of the places for my grandmother - the really upper market retirement villages or complexes with frail care, etc are in the region of R3.5m+ (i.e. your last stop)
Billy
Expert Member
If you are married, one thing to consider is to balance the pensions.
It is pointless for Hubby to have a pension of 30K and pay tax on it. Far better for both partners to have 15K and neither pay tax.
It takes a bit of effort to set this up but pays in the long term.
It is pointless for Hubby to have a pension of 30K and pay tax on it. Far better for both partners to have 15K and neither pay tax.
It takes a bit of effort to set this up but pays in the long term.
When I need assistance, it's time for the silver bullet retirement plan to kick in.
cerebus
Honorary Master
Retirement certainly isn't about counting pennies and surviving until death, at least it's not how I perceive my own retirement. I intend to be extremely active and fit and still investing, and building, and learning new skills, and basically living the way I'd want to live now, if I didn't have to work. The thing is though, none of that activity costs much money and a lot of it either makes or saves money.
Hobbies can be income generating. I have an intention of running my own vegetable garden and becoming self-sufficient - so both increasing the quality of my food, getting me outdoors and healthy, and lowering the cost of fresh groceries. If I had R50k, I'm not sure exactly how I'd spend it. I don't want a R5k revolving car loan, and I'm already switching to cycling most places rather than driving out of choice. If the money was there 'in case I want to do something with it', I think I'd rather do what I do now, and actually plan for the things I want to do with it.
I'm generally quite optimistic about my retirement because I think the way I live now is going to feed into old age, and reduce the risk of debilitating health issues just by living healthily. From my observations, the things that really cripple older people are failing to take care of themselves and developing life habits (such as a predilection for R2000 wine a month) that eat at even very high salaries and prevent them from saving adequately, and becoming sedentary and afraid of change as they enter into middle age.
cerebus
Honorary Master
Ah the really upper market retirement villages. If I get to the point of needing assisted living, I think it's safe to say that my years are counted on a hand, and you can spoon feed me in a wheelchair till I croak.
akescpt
Honorary Master
I want to work Tuesday to Thursday. if I can get there I would be happy. so I need to convince the wife of this ideal. without her support it just wont work.
You have read articles on the state of retirement in SA? I think there was one recently on mybroadband even , that its one of the worst countries for retirement?
My poorer grandparents were exceptionally active... but - that doesn't put food on the table when you're over 90.... and when you get to that age, you'll be struggling to maintain your own garden, and cycle to the nursery to get goods to plant/fertilize/etc/etc.
Go have a look at a state retirement home... remember, you could end up there a lot sooner than expected with various diseases that become more common with age, dementia, alzheimer's , parkinson's, etc
akescpt
Honorary Master
Whaaaaat? You need to blog or something. I need to follow what you did!
SauRoNZA
Honorary Master
akescpt
Honorary Master
And he STOPPED working. I would like to know how. Unless I missed something.
SauRoNZA
Honorary Master
Oh right. I missed that detail.
I thought he was just working for himself from home? At least that's what I gathered from other conversations.
I was under the impression he was a top tier developer making lots of coin. If his goal from the start was to put money away and live a moderate life so he can "retire" early then it's no surprise really that he would achieve it with good planning and discipline.
If you have the means and you are making 100k a month while working then it's pretty easy. Problem is most people fall into the lifestyle trap and then want to keep it going.
If you never fell in the lifestyle trap in the first place, no problem.
cerebus
Honorary Master
My word you are one pessimistic dude.
My father in law is 80 now and he's also getting to the point of struggling with those things. But at the age of 90, and without much ability to get out and about, I imagine that my personal costs would also become very, very minimal. And then to have what would today be R15000 would easily cover those needs. I'd have to become literally bedbound or within a few years of passing on before I couldn't do some basic gardening. In fact the gardening isn't really about cost saving, it's just something I've always wanted to do and can't manage to have time for at the moment, and would have compound benefits. R15000 is based on our current food levels minus children.
Is there no middle ground between a state retirement home and an upper market retirement village? There were some private retirement homes in the area we used to live in that were quite decent - your own flatlet, nice grounds, etc. Be interested to know what those go for.
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