Jeremy Duffield, Author at Retirement Essentials

Earning your way with super and your savings

We deal with the second major uncertainty in retirement: how much you’ll earn on your super and savings/investments.

Retirement Principle #3: The more you earn on your investments, the longer your savings will last and the more you can spend.

Sounds pretty obvious…but it might surprise you to know the difference it can make.

Here’s a way to see the impact. This chart shows the sustainable spending rate for various levels of investment return for a 67 year old couple with $500,000 in super and savings, planning on a retirement horizon till age 92. If they put their money under the mattress and earn nothing, they might be able to spend $61,700 per year. However if they were to earn 7% per year through a sensibly invested super fund, they might expect to spend $68,300 per year.

Your retirement horizon and your spending level

by Jeremy Duffield | Retirement Spending

In Australia, we’re responsible for our retirement. The government helps with the Age Pension and Aged Care. But the rest we supply ourselves through our super and other savings and perhaps some work income.

The big questions are how much can I afford to spend? And how long will my super and savings last? And what do I have to do to make the most out of my retirement resources?

They’re tough questions to work out because there are two big unknowns:

How long will I, or we, live? and

How much will I/we earn on our super and our investments?

In our first article, we identified the resources you have to fund retirement. You need to spend down some of those resources to pay your expenses. So, when working out how much we can spend, a second key principle to understand is: The longer we need to plan for, the less we can spend each year.

This chart illustrates the principle. It shows that the longer your retirement period, the less you can spend each year without running your savings down to the point where you rely on the Age Pension only. This example is showing what a 67 year old couple with $500,000 in super and savings could afford to spend based on their selected retirement age horizon. If they

Resourcing your retirement

by Jeremy Duffield | Retirement Advice

A good retirement is about so much more than money – whole books are written about getting the most out of your life after ending full time work. But when the payslips end, you become responsible for funding your retirement necessities and your pursuits out of your “retirement resources.”

Through super and savings you’ve been getting ready, building a nest egg. It’s time to call on the nest egg and start drawing it down. It’s a big change in the way you need to think about your finances…and requires a bit of planning and forecasting to work out how much you can afford to spend and how to make the most out of your retirement.

Retirement Principle #1 The first rule of retirement finances might be: The greater your retirement resources, the more you can afford to spend in retirement.

No duh, eh? It sounds obvious that the bigger your nest egg, the more you can afford to spend. And that the opposite would be true too; the lower your retirement resources, the less you can spend.

But what are your retirement resources? How much do you really have? And if you’re not yet retired, but getting ready, what can you do to increase them?