Personal wealth

[F40]

How much is enough to retire wealthy? At which point would you consider having enough money.

Unrelated question: To track personal wealth, it has been suggested that average accumulators of wealth should target as follows - gross annual income divide by 10, then times age. That is the amount of net assets one should target. Prodigious accumulators of wealth will have 2 times that and below average will have halve of that.

I am a balance sheet as opposed to income focused individual. I believe in focusing on building assets which will later translate into income. I do not worry about actual income too much at this stage.

For what it is worth - My ratio from above is 3.9 and I am 40.

 

[Freaksta]

How much is enough to retire wealthy? At which point would you consider having enough money.

Unrelated question: To track personal wealth, it has been suggested that average accumulators of wealth should target as follows - gross annual income divide by 10, then times age. That is the amount of net assets one should target. Prodigious accumulators of wealth will have 2 times that and below average will have halve of that.

I am a balance sheet as opposed to income focused individual. I believe in focusing on building assets which will later translate into income. I do not worry about actual income too much at this stage.

For what it is worth - My ratio from above is 3.9 and I am 40.

Define wealthy? That's a tough one to answer, for some people living in a decent house and car that's paid off with some income generating assets are wealthy. There are other people who have multiple houses and cars who are also wealthy.

I personally want to have enough assets at about 45 years of age to completely stop work if i wanted to, ie be financially independent.

 

[Nerfherder]

Above all, wealth is a state of mind.

 

[MKFrost]

Rule of thumb - 25 x annual salary....

So what you want to earn monthly when retired x 12 x 25

For example: If you want to receive R30,000 per month after retirement then you must accumulate R30,000 x 12 x 25 = R9,000,000 before you will be able to retire.

As said, rule of thumb i.e. a quick way to estimate the gross amount you will need for retirement. There are obviously a number of other factors to consider but this will give you a quick ballpark figure to work with and or to start from.

 

[JStrike]

How much is enough to retire wealthy? At which point would you consider having enough money.

Unrelated question: To track personal wealth, it has been suggested that average accumulators of wealth should target as follows - gross annual income divide by 10, then times age. That is the amount of net assets one should target. Prodigious accumulators of wealth will have 2 times that and below average will have halve of that.

I am a balance sheet as opposed to income focused individual. I believe in focusing on building assets which will later translate into income. I do not worry about actual income too much at this stage.

For what it is worth - My ratio from above is 3.9 and I am 40.

Well, that doesn't work. If you have a low salary and just average net assets, you will get a high ratio, even though a person will have low wealth.

I suspect a better way of looking at it would be what is the income from assets and at what speed is that income increasing

 

[Billy]

You will need invested capital of 250 times the income that you want at the time of retirement.

R30000 per month income equal R7.5M invested with about a 5% draw down.

On past history, your capital will grow at above the draw down plus inflation, enabling your income to keep pace with inflation.

 

[JStrike]

You will need invested capital of 250 times the income that you want at the time of retirement.

R30000 per month income equal R7.5M invested with about a 5% draw down.

On past history, your capital will grow at above the draw down plus inflation, enabling your income to keep pace with inflation.

Agreed. However, it is isn't quite that rigid. I have managed to get capital income of around that figure, but on a lower capital amount. Both capital income and capital are increasing faster than inflation. It all comes down to how you are managing your capital

 

[Gaz{M}]

Thing is, you don't need your full salary when you retire because you definitely should not have a bond anymore. You also don't need to "save" as much because you are now old and are not saving for "retirement" again, don't have kids school fees or any of that other middle-aged expense anymore.

I think most people could easily get by on R15 000 a month take home money. For that you probably need around R4 million in capital. Or have 4 rental flats that bring in R4000 a month which would cost you R2.5 million to buy.

You need a diverse source of incomes. Not just one lame pension from a Life Insurance company. Have some property, some shares, some unit trusts, a life/living annuity and maybe a small hobby/business that earns you a few grand now and then.

Personally, I need a Lamborghini in the garage, a R4 million rand house and 4 overseas holidays a year to feel "wealthy".

 

[Gaz{M}]

Agreed. However, it is isn't quite that rigid. I have managed to get capital income of around that figure, but on a lower capital amount. Both capital income and capital are increasing faster than inflation. It all comes down to how you are managing your capital

Can you share more details without exposing too much personal info?

 

[w1z4rd]

My wife and I are not saving to retire. We take our money and invest it it. Our plan is to buy some properties and buy a couple of businesses (including a franchise or two). We do have "savings" like retirement annuities, but I really dont have much faith in them (when taking inflation into account). At least with running businesses, you will have an income for the rest of your life (unless you screw up the business).

 

[Cius]

Very subjective. The best measure of wealth I have ever heard was from the Millionaire next door (a really good book on money btw). It went something like this:

The measure of your wealth is how long you could maintain your current lifestyle if your income dried up.

That means its not just a measure of rands in the bank, its also about how fast the rands are leaving your bank. One guy could have 10 million in the bank but he spends 5 each year. I would call him poor. Another guy could have 4 million in the bank but he lives comfortable on 400K per year. He is wealthy as he could go 10 years without breaking a sweat.

 

[JStrike]

Can you share more details without exposing too much personal info?

Properties in high-end, high-growth areas
Plus a bit of shares in dividend paying stock

 

[Dolby]

Why not just shares in commercial property?

I'm not sure how fantastic property is as an investment nowadays

 

[Lukcydog]

How much is enough to retire wealthy? At which point would you consider having enough money.

Unrelated question: To track personal wealth, it has been suggested that average accumulators of wealth should target as follows - gross annual income divide by 10, then times age. That is the amount of net assets one should target. Prodigious accumulators of wealth will have 2 times that and below average will have halve of that.

I am a balance sheet as opposed to income focused individual. I believe in focusing on building assets which will later translate into income. I do not worry about actual income too much at this stage.

For what it is worth - My ratio from above is 3.9 and I am 40.

http://en.wikipedia.org/wiki/The_Millionaire_Next_Door

The calculation is flawed as described in the article above. My wife and I save significant amounts of money every month, but according to that calculation we fall in the AAW which imo is total rubbish. We don't drive fancy cars, our house isn't fancy, we don't go out every night, we consider everything before buying something expensive.

To me the critical principles are:
- Spend less than you earn. Pay yourself FIRST and invest that money.
- Don't try keep up with the Jones's with your lifestyle

How much is enough to retire? Good question. I set a target of 1mil a year at retirement start with a life expectancy of 40years (20+20 for wife and me) so R40mil, but I suspect I would need more than that by the time we retire (future value of rand etc etc).

 

[Devill]

My wife and I are not saving to retire. We take our money and invest it it. Our plan is to buy some properties and buy a couple of businesses (including a franchise or two). We do have "savings" like retirement annuities, but I really dont have much faith in them (when taking inflation into account). At least with running businesses, you will have an income for the rest of your life (unless you screw up the business).

Building towards the same thing. When I stop working I will have business interests that will generate an income, and on a lesser scale some investments that give a annual set return.

 

[F40]

Rule of thumb - 25 x annual salary....

So what you want to earn monthly when retired x 12 x 25

For example: If you want to receive R30,000 per month after retirement then you must accumulate R30,000 x 12 x 25 = R9,000,000 before you will be able to retire.

As said, rule of thumb i.e. a quick way to estimate the gross amount you will need for retirement. There are obviously a number of other factors to consider but this will give you a quick ballpark figure to work with and or to start from.

I think the 4% rule you are referring to is too conservative. And that assumes you do not tap into the capital (not that I want to do that in any event).

I think a pre-tax return of 7% on low to medium risk is very achievable. So using that and applying the PAW principle in the first post to my own situation of 3.9 in terms of that calc, it comes close to an "acceptable" monthly income in today's money.

 

[F40]

http://en.wikipedia.org/wiki/The_Millionaire_Next_Door

The calculation is flawed as described in the article above. My wife and I save significant amounts of money every month, but according to that calculation we fall in the AAW which imo is total rubbish. We don't drive fancy cars, our house isn't fancy, we don't go out every night, we consider everything before buying something expensive.

To me the critical principles are:
- Spend less than you earn. Pay yourself FIRST and invest that money.
- Don't try keep up with the Jones's with your lifestyle

How much is enough to retire? Good question. I set a target of 1mil a year at retirement start with a life expectancy of 40years (20+20 for wife and me) so R40mil, but I suspect I would need more than that by the time we retire (future value of rand etc etc).

There are many ways to calculate what one needs. I do have a fairly high annual income, but I have still managed to achieve 3.9 with the calculation. But I do not profess that the ratio is the alpha and omega. I personally work on a gross return of 7% from my investments and avoiding touching the capital to calculate what I need/want in terms of personal wealth. My personal goal is R100k per week income from my investments (passive) when I reach 50 in 10 years' time.

 

[^^vampire^^]

There are many ways to calculate what one needs. I do have a fairly high annual income, but I have still managed to achieve 3.9 with the calculation. But I do not profess that the ratio is the alpha and omega. I personally work on a gross return of 7% from my investments and avoiding touching the capital to calculate what I need/want in terms of personal wealth. My personal goal is R100k per week income from my investments (passive) when I reach 50 in 10 years' time.

What I always find funny about the articles I read is that they say retire at 65 and budget for 20 years after retirement.
No one in my family dies before 95 and I want to retire at 50 which means I will be catering for 50 years of retirement

 

[atomcrusher]

I retired early 2011. I never withdrew any cash from retirement funds from Pension / Provident funds that I had from previous companies where I was employed. Where I could transfer from one fund to another (where the fund allowed it) of work changes, I did just that. Most of my employment was in the Gauteng area.

I owned 3.5 residential properties (the one property I owned jointly & equally with my partner), and while I was working, I managed to pay off almost every property mortgage I had ... the exception being an investment property on which I had a mortgage, where the rental income, plus all other expenses (e.g. interest on the mortgage) incurred in the generation of that rental income, is tax deductible)

The home I live in now was bought for cash 2 years before we retired and moved to the Western Cape in May 2011. I retired just a couple of months before my 60th birthday. I draw down from my various investments (e.g. Living Annuities, etc) each month, but my draw-down is far less than the capital growth I get from all my investments. I use the services of a financial planner to advise me on my varied investments, and so far it seems my investment portfolio looks pretty good.

I am now looking at investing in overseas investment funds (in line with SARS allowances) to hedge my bets i.r.o. my considered opinion that the ZAR will weaken significantly in my current 5 - 10 year outlook period (i.e. versus "real" currencies such as Sterling / Euro / USD, etc.)

I realise that saving is not easy .. I had been pretty much down & out in SA after I left the-then Rhodesia in the late 1970s, after too many years fighting an inevitable lost cause in the Rhod. Army there.

But I was prepared to work hard, and put in long hours, for my several employers in SA. The hard work & dedication paid off, but it was only in the last 15 years where I started a manufacturing company in SA on behalf of a large German Corporation. This job paid well, as my income was dependent on the local company's financial success. And I made sure it was a success

I worked on average probably 15+ hours per day in those 15 years, but the rewards have enabled me to retire very comfortably.

 

[Arthur]

So what's the size of your pot, atomcrusher? What return are you making on your investment?