Fred and Georgina are about two years out from retirement. Their home is paid off, the kids have moved out, and now their only responsibilities are to each other (plus spoiling the grandkids).
Fred works in a factory making ceramic tiles and Georgina works in a local business as a shop assistant. They have a combined gross income of approx. $120,000 pa (net $95k).
They have a little bit in super but no other financial assets. And at this stage they have no plans of downsizing their home to help fund their retirement either.
Fred and Georgina have seen all the scary ads on TV and now they’re worried they can’t afford to retire.
One TV ad said they need at least $1,000,000 in super, while another article in the Sunday paper has suggested they need at least two thirds of their earned income coming in each year to retire on, and some other friend has told them their planner has suggested they need at least $2m in property!
No wonder they’re confused (and frightened)!
The thought of retirement caper has given Fred and Georgina a massive headache and now they don’t know what to believe. So, they’ve asked to come in and get a horse’s mouth for themselves.
Like most people preparing for retirement, they have two burning questions:
In this Moowsletter, I’m only going to address the first question, which is a cost-based question. I will address the second question in a few weeks, which as you may have guessed, is an income-based question.
The Difference Between a Modest and a Comfortable Retirement
After we discuss their needs, wants and concerns, I can see Fred and Georgina have begun to relax a little. But things are still a bit foggy for them.
So to help clear the air, I show them the following table which delineates the difference between a modest and a comfortable retirement. It helps give their retirement plans some shape.
Source: The Future of Retirement: Shifting Sands, published in 2017 by HSBC Holdings plc.
Because Fred and Georgina have never run a budget for the house, these numbers don’t mean a lot to them, so to help put things into perspective, I explain it this way…
A modest retirement of $34,855 pa is pretty much in line with what a couple will receive in the form of a full social security pension. i.e it will cover their staples – groceries, utilities, and there may be a tiny bit left over to spoil the grand kids with, but not much.
A comfortable retirement of $59,971 will cover their staples, spoil the grand kids plus give them a nice holiday each year. They should also be able to buy a good quality second hand car every five years.
Understandably, Fred and Georgina would love a comfortable retirement, but they don’t think its possible. In a few weeks, I’ll show you how they can achieve a comfortable retirement with just $250,000 in super.
Have a great weekend!
Adam
Note – Fred and Georgina are real humans with unreal names.
Backyard – happy 24th birthday Shabs! 😉
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