How much money do you need to retire comfortably?
I know many Australians aspire to retire with a nest egg of $1 million plus their own home without a mortgage.
Sound reasonable, but it’s not really enough.
Just run the numbers in this Money Smart retirement planner which shows you that if they had $1 million, a home-owning couple at age 65 could expect an annual after-tax income of $61,000 a year until they reach age 90, including the part age pension.
Now the Association of Superannuation Funds of Australia’s Retirement Standard estimates a home-owning couple needs almost $58,000 a year for a ”comfortable” retirement.
So does that mean you just need $1 million and you’ve made it?
I’m not sure most Australians would be “comfortable” with $60,000 a year.
Not if you want to enjoy your life to the fullest.
And if you plan to retire before age 65 or you’d really like to enjoy your retirement years, you’ll need an even bigger nest egg.
Then there is this interesting thought: an Actuaries Institute report said advances in medicine could eventually see half of all 65-year-olds live beyond 100.
The bottom line is $1 million is not enough for most people.
Sure you may come into an inheritance or free up some of your home equity by downsizing.
But there is also a concern that the government may not be able to supplement your nest egg with the pension and even worse…
The concept of having a nest egg is flawed.
The thought of eating away your savings is like killing the goose that lays the golden egg.
Living off your savings hoping you won’t live longer than your money lasts you.
The alternative of course is to build a substantial asset base of income producing properties will keep growing in value, meaning you can live of the cash machine of your property portfolio.
So how many properties do you need to retire comfortably?
This really depends upon the lifestyle you choose, but I’ve explained this in more detail in the following blog: How Many Properties Do You Need To Retire.