Financial Independence (Home Ownership, Super, Long Retirement) not possible for wage earners: What do we need and how do we get it?

[tech/a]

Happy New Year everyone

2024 opens with many challenges for most.
Following the discussion on one of the housing threads I feel that there is
a great deal more that needs to be considered by everyone who chooses to live
in western society. Getting a job is generally the first consideration after we finish
our education at what ever level we wish to or are able to attain.

Our aims are to live comfortably.
Own a home, have a family , enjoy the best quality of life we can including all
many of the toys — then retire comfortably enjoying the fruits of our endeavour.

But from experience most don’t consider what they need for retirement
Forced or chosen.
Further often they under estimate what they will need particularly a couple.
So very very few will attain all. Statistically under 5% ( depending on your
opinion of what financial independence is particularly after 10 or so years
of retirement)

These are questions which need serious consideration
Not just pontification but answers —- better still a blueprint.

So how much do we need and how do we get there ?
With housing being unobtainable to many disposable retirement income
is nothing but an impossibility.
To some it will prove to be correct.
But to others it will be possible in fact I believe most —- with a well thought out
blueprint —- you can have it all but not without effort And thinking well out of
your square.

I have a blueprint which I’ll present including the why and how (Many know
I have a lot of property BUT the blueprint goes well beyond that.)

I encourage those here who are living or organising their blueprint to take part
in this thread. You wouldn’t have found your way to ASF unless you wanted to
invest in your financial future! So let’s help build the future we all want our selves
and our families to live.

Let’s make 2024 the start for some and the continuation for others to financial
freedom .

tech

 

[Value Collector]

How much you need to retire unsurprisingly depends on two things.

1, how much income you need.

2, what annual return on capital you can make.

Some one with a $60,000 life style good probably get away with as little as $600,000 of invested capital if they can earn 10%.

Others that can rely on earning only 5% would need $1,200,000 to earn $60,000.

How long you expect to live is also a big factor, because the shorter life expectancy you have the more you can dig into you capital base drawing it down to fund life style, and you may also qualify for pensions and reverse mortgages etc.

—————
If you invest well, and use compounding you can earn your retirement in a short period.

$10,000 invested in BHP in 2000 and all dividends reinvested back into BHP shares would be worth about $600,000 today.

That one investment along with an owned home and some super would fund many years of modest retirement, if you had purchased similar amounts of CBA, Woolies or just the index you would be sitting even prettier.

 

[JohnDe]

I’ve been thinking about that for a while, more so lately: how much do my wife and I need to live comfortably during retirement.

I don’t know the goal posts keep moving, governments waste our money collected through taxes and then need more, inflation keeps rising, and we don’t know how long we’ll live for.

I’m guessing $3m

 

[divs4ever]

I don’t know the goal posts keep moving,

absolutely , and that is part of the problem , add in some ( hard to predict ) inflation/stagflation

i can see more and more 'tax refugees ' in the near future

 

[Value Collector]

Most people won’t need anywhere near $3 Million, if you can earn 6% $3 Million will give you over $200,000 year over a 25 years retirement.

You also have the pension to fall back on and things like drawing down capital out of your home.

Many people make the mistake of eating into the useful years of their retirement by working to long because they want to save Millions, what they fail to realise is how the last half of their retirement / the no go years, they can’t spend their money, and would have been better retiring earlier.

 

[qldfrog]

Now retired and having own home means different things:
For us with a small acreage and a self sufficient house. Food bill is minimal , no water or power bill.
Obviously some maintenance and repairs but being technically aware, very limited costs:
So minimum mandatory expenses are medical, fuel, insurances, rates and taxes plus 3k of coffees/ restaurant a year.
I think $1 million 2024 should keep us going so my answer
If it does not, time to change country.
We like travelling so budgeted more

 

[Tyre Kicker]

At this point in time, retiring with 1 million in super earning just under 5%, if you are lucky,(assume own on home, no debts etc) should provide a comfortable lifestyle.

 

[divs4ever]

At this point in time, retiring with 1 million in super earning just under 5%, if you are lucky,(assume own on home, no debts etc) should provide a comfortable lifestyle.

for how long ??

land rates and other taxes will rise in one way or another , other services will rise in parallel to rising business costs

a lot of durable goods bought in current times aren't as durable as their predecessors

$3 million now might seem extreme ( to inflation ignorant Leftoids ) but if your investment returns barely keep pace with real inflation $3 million is liable to become pocket change in say 10 to 15 years time

remember half the home owners in the east coast capital cities have become millionaires simply by paying out their mortgage , local and state fees and charges will rise in parallel to those rising valuations , so eroding your investment returns

 

[Belli]

Throw your numbers into this "best guess." Stress out depending on the level your personal anxiety state along with any lack of knowledge of actually what will happen in the future.

Inflation Calculator

Free inflation calculator that runs on U.S. CPI data or a custom inflation rate. Also, find the historical U.S. inflation data and learn more about inflation.

www.calculator.net

 

[Value Collector]

for how long ??

land rates and other taxes will rise in one way or another , other services will rise in parallel to rising business costs

a lot of durable goods bought in current times aren't as durable as their predecessors

$3 million now might seem extreme ( to inflation ignorant Leftoids ) but if your investment returns barely keep pace with real inflation $3 million is liable to become pocket change in say 10 to 15 years time

remember half the home owners in the east coast capital cities have become millionaires simply by paying out their mortgage , local and state fees and charges will rise in parallel to those rising valuations , so eroding your investment returns

That brings up another point. Eg have your funds invested in assets that are naturally inflation hedged, eg real estate and shares.

 

[Belli]

That brings up another point. Eg have your funds invested in assets that are naturally inflation hedged, eg real estate and shares.

Yep. It is one reason to never stop investing even in retirement. For those who own their own PPOR, there is a need to cover the annual non-discretionary costs of living in the property; rates, utilities, maintenance, insurance, etc. Factor in the percentage of the income you expect to receive in order to cover those costs. Unless you prefer to live in a tent.

 

[qldfrog]

Yep. It is one reason to never stop investing even in retirement. For those who own their own PPOR, there is a need to cover the annual non-discretionary costs of living in the property; rates, utilities, maintenance, insurance, etc. Factor in the percentage of the income you expect to receive in order to cover those costs. Unless you prefer to live in a tent.

Agree but one option few consider: move...
The immediate backslash being usually family : valid and very personal
Healthcare ..as if healthcare in Australia was free and better quality..maybe for some but not everyone and everywhere
And obviously personal taste as to do you want to live in Portugal, Vietnam, Costa Rica, or relocate in a country place in Australia.

 

[macca]

At present people can get pension benefits when a couple have about $1m in assets other than their PPOR, so as the capital draws down the pension increases.

I know two couples who are on full pension, both own their own house and both say it is easy to live just on the pension.

One couple says our bills are $22k per year, we get $41k pension so we go on holidays with the surplus.

Both couples have good cars, one has 2 cars, both go out for lunch often.....

So I would say after the world trip, about $1m left over to be invested conservatively.

 

[InsvestoBoy]

FIRE community has these questions discussed and answered:

Financial Independence, Retire Early (FIRE): How It Works

Financial Independence, Retire Early (FIRE) is a movement dedicated to living frugally to retire at a young age. FIRE devotees aim to save at least 25 times their annual expenses.

www.investopedia.com

Aussie Firebug | Financial Independence Retire Early

Aussie Firebug is an anonymous blog detailing the journey to financial independence through investing in real estate, low cost index funds and Super. By investing at a young age and consistently it is possible to reach a point where your investments pay you enough money to live off forever...

www.aussiefirebug.com

Australian Financial Independence Calculator - Aussie Firebug

The ultimate Financial Independence Calculator for Australians that incorporates Super and current Australian preservation laws.

www.aussiefirebug.com

The Shockingly Simple Math Behind Early Retirement

This is the blog post that shows you how to be wealthy enough to retire in ten years. Here at Mr. Money Mustache, we talk about all sorts of fancy stuff like investment fundamentals, lifestyle chan…

www.mrmoneymustache.com

The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”

In the world of early retirees, we have a concept that goes by names like “The 4% rule”, or “The 4% Safe Withdrawal Rate”, or simply “The SWR.” As with all thing…

www.mrmoneymustache.com

FIRE community is like financial planning for the layman, you can learn some more quantified stuff:

Retirement's Volatility Bogeyman - GestaltU

Investment marketing is like watching a talented magician ply his trade. While the marketing geniuses keep everyone focused on the hottest new funds and stocks in an effort to chase strong returns, people forget about the single most important thing that matters to your retirement portfolio...

www.gestaltu.com

You're Looking at the Wrong Number

In a prior post entitled ' Retirement's Volatility Bogeyman ' we introduced the critical concept that volatility is the unsung villain of r...

gestaltu.blogspot.com

These are questions that while you can answer yourself, a qualified financial planner type person can explain how you figure it out properly, what terms like Safe Withdrawal Rate/Retirement Sustainability Quotient etc mean.

The more you dig the more you will realise that whatever answer you give depends entirely on assumptions you make and you have to make a lot of assumptions:
* future of your employment
* future suitability and affordability of your housing
* future of government safety nets for old people
* future returns
* future inflation
* future climate
* future economy
* future of money

 

[Belli]

Agree but one option few consider: move...
The immediate backslash being usually family : valid and very personal
Healthcare ..as if healthcare in Australia was free and better quality..maybe for some but not everyone and everywhere
And obviously personal taste as to do you want to live in Portugal, Vietnam, Costa Rica, or relocate in a country place in Australia.

Nice points.

I'll scape through despite no longer getting a private health fund rebate as my taxable income is considered too good according to the current legislation. Oh well, as I sucked on the public teat for many a year I've nothing to complain about really.

 

[macca]

I do think that we need to consider that for most of us, we need to do the things that require physical effort while we are able.

I have seen many people who have left it too late and I feel a bit sorry for them, I live near a holiday area and to see folk in their 70s wrestling with a huge caravan makes me glad that I started ticking the bucket list when I was 50.

We never know when we will have a bit of bad luck and it can cause depression when people realise they ain't going to do that "thing" they have always wanted to do.

We also need to consider what style of living is desired, some people love spending money, theatre, cars, fine dining, first class travel, beauty treatments etc all suck up money so that needs to be considered as well.

Kmart, Aldi or designer? the difference will seriously affect your bank balance over 20 years

We all know someone who is a showy spender and we all know someone who builds a nice little nest egg for their old age.

The spenders are the ones who find it very hard to survive on the pension or other fixed income streams and the quiet accumulators are all members of ASF

 

[tech/a]

FIRE community has these questions discussed and answered:

Financial Independence, Retire Early (FIRE): How It Works

Financial Independence, Retire Early (FIRE) is a movement dedicated to living frugally to retire at a young age. FIRE devotees aim to save at least 25 times their annual expenses.

www.investopedia.com

Aussie Firebug | Financial Independence Retire Early

Aussie Firebug is an anonymous blog detailing the journey to financial independence through investing in real estate, low cost index funds and Super. By investing at a young age and consistently it is possible to reach a point where your investments pay you enough money to live off forever...

www.aussiefirebug.com

Australian Financial Independence Calculator - Aussie Firebug

The ultimate Financial Independence Calculator for Australians that incorporates Super and current Australian preservation laws.

www.aussiefirebug.com

The Shockingly Simple Math Behind Early Retirement

This is the blog post that shows you how to be wealthy enough to retire in ten years. Here at Mr. Money Mustache, we talk about all sorts of fancy stuff like investment fundamentals, lifestyle chan…

www.mrmoneymustache.com

The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”

In the world of early retirees, we have a concept that goes by names like “The 4% rule”, or “The 4% Safe Withdrawal Rate”, or simply “The SWR.” As with all thing…

www.mrmoneymustache.com

FIRE community is like financial planning for the layman, you can learn some more quantified stuff:

Retirement's Volatility Bogeyman - GestaltU

Investment marketing is like watching a talented magician ply his trade. While the marketing geniuses keep everyone focused on the hottest new funds and stocks in an effort to chase strong returns, people forget about the single most important thing that matters to your retirement portfolio...

www.gestaltu.com

You're Looking at the Wrong Number

In a prior post entitled ' Retirement's Volatility Bogeyman ' we introduced the critical concept that volatility is the unsung villain of r...

gestaltu.blogspot.com

These are questions that while you can answer yourself, a qualified financial planner type person can explain how you figure it out properly, what terms like Safe Withdrawal Rate/Retirement Sustainability Quotient etc mean.

The more you dig the more you will realise that whatever answer you give depends entirely on assumptions you make and you have to make a lot of assumptions:
* future of your employment
* future suitability and affordability of your housing
* future of government safety nets for old people
* future returns
* future inflation
* future climate
* future economy
* future of money

For me it has always been placing myself and my family in a position that we/I don’t need to be concerned with Future “ What ifs “ .

50 years ago I remember as clear as crystal sitting at the laminex Kitchen table with my first wife both 20
We had just combined our fortnightly wages and considered a budget.
There was $10 left for Julie and I .

I remember looking at Jules and shaking my head
I said “ I don’t know about you but I can’t live like this!”

I /we didn’t and haven’t.to this day although Julie and I are no longer together

My simple method and opinion soon.
Starting With
Being a regular/standard P.A.Y.E employee JUST WONT CUT IT !

 

[Dona Ferentes]

My simple method and opinion soon.
Starting With
Being a regular/standard P.A.Y.E employee JUST WONT CUT IT !

start early, live within your means.

 

[moXJO]

Shares kind of suck. Maybe the passive nature of it is ok . You can earn 3x for every dollar or more selling stuff on the regular. Bit more effort though

 

[Value Collector]

start early, live within your means.
View attachment 168248

Or for those that want need a video to explain the same concept see below. This was explained to me at a young age, I took it to heart.

1. At 14 I began saving and investing

2, At about 32 I stopped saving and just left my capital compounding, while I loosened the purse strings and started spending a bit more

3,At 36 I retired from my day couple of million started pulling a modest wage from my portfolio about 50% of earnings

4, today I am in my 40's and in the low 8 Figures portfolio value, compounding is amazing.