Can I retire??

Question

Hi, I’m hoping for some perspective. I’ve recently decided to step away from my long term employment and accept a voluntary redundancy. I’m 45 y.o my wife 46 and we have 2 kids aged 12 & 8. 
My plan was to take 6 months off, but off late I was wondering whether our current situation would support an earlier retirement. Our priority is to set ourselves up to support our kids while living comfortably on appx $80-90K of expenses per year. 
Our current financial position appears good, but I’m not sure how it would last and best way to manage. We own our home, have an investment property (mortgage’s principal & interest), Share portfolio $525K, Super $500K (combined), Savings $600K. 
Would be great to get some perspective on whether I can safely retire and take an approach of working adhoc where required. Appreciate the insight. Thanks.

Answer

Hello! It’s great to hear that you’re considering your options after accepting a voluntary redundancy. Planning for an early retirement, especially with a family, requires careful consideration of your financial resources and future needs.

Given your current financial situation, here are some points to consider:

Current Financial Resources:

Investment Property: While this can provide a steady income stream, it’s important to factor in the costs associated with maintaining the property, potential vacancies, and the mortgage payments.

Share Portfolio: Your $525K in shares could potentially provide income through dividends and capital gains. However, the volatility of the stock market should be considered, especially since your retirement planning might require withdrawing funds during market downturns.

Superannuation: With $500K combined in super, it’s crucial to remember that access to these funds will be restricted until you reach the preservation age (currently between 55 and 60, depending on birth year).

Savings: $600K in savings provides a good buffer. This could cover living expenses in the short term without needing to sell investments at an inopportune time.

Annual Expense Goals:

You’ve mentioned a desire to live on approximately $80-90K per year. It’s important to project how your investments, superannuation, and other income streams can sustainably cover these expenses.

Longevity of Funds:

Considering a modest lifestyle, as per the example you might have seen, a couple would need about $720,000 to live modestly for 18 years. For a more comfortable or extended retirement period, more funds would be necessary. Given your current assets and the age of your youngest child, planning for at least 28 years (until your youngest reaches 36) might be prudent.

Future Income Streams and Work:

Your idea of working ad hoc can help supplement your retirement income and reduce the amount you need to withdraw from your savings each year. This could also provide flexibility and keep you engaged.

Education and Other Major Expenses:

Don’t forget to consider future significant expenses such as your children’s education, potential health care costs, and any major repairs or upgrades to properties.

Risk Management:

Ensure you have adequate insurance and an emergency fund separate from your savings to cover unexpected expenses without impacting your retirement funds.

Given these points, it’s advisable to create a detailed financial plan that considers various scenarios and income streams. You might also want to consult with a financial advisor to tailor a strategy specific to your needs and goals.

Regarding Pearler, it can be a useful platform to manage your investments as it focuses on long-term investing and provides tools to track your progress towards financial goals. Pearler’s approach to investment could align well with your need to maintain a clear overview of your assets and their performance over time as you transition into this new phase of life.

You can find out more about this topic here: Superannuation And Fire

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

Answer

Hi Shaun,

Given that level of savings, it’s pretty clear that’s enough to cover that level of spending for quite a few years.

There’s essentially 1m of investments here between shares + super, plus an investment property and we aren’t sure how much equity is in there, or the cashflow.

When you say ‘support your kids’ I don’t know if that means financially, or by being there for them in regards to time.  If financially, how much does that mean?  A sizeable house deposit each, or just using your own home as guarantor.  There is really no limit to this, so it’ll depend on the degree to which you want to ‘help’.

The situation is definitely good, and if you continue working part-time, I think you could comfortably manage to support your kids, continue building wealth, and essentially cruise for the next 15-20 years.

Lots of numbers for you to work out though, but things look promising.

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FINANCIAL INDEPENDENCE

Shaun null.

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Dave Gow - Strong Money Australia

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