Speaker 1: Exactly how much do we really need in order to
Speaker 1: be able to retire rich? Theres seven questions to help
Speaker 1: you out right now. Welcome to Sugar Mama's Fireplay, the
Speaker 1: podcast where we ignite your path to financial independence and
Speaker 1: an early retirement. I am your host financial planner, Canna Campbell,
Speaker 1: and each week we dive deep into the fire lifestyle movement,
Speaker 1: bringing you empowering stories, expert advice, and practical tips to
Speaker 1: help you take control of your financial future. So, whether
Speaker 1: you're just starting out on your financial journey, welcome, or
Speaker 1: if you are well on your way to achieving financial independence.
Speaker 1: This is the place for education, inspiration and motivation. Even
Speaker 1: my dogs are getting a bit excited. And I am
Speaker 1: here for you every Monday mon at five am, so
Speaker 1: please make sure you are following this show. So let's
Speaker 1: set up the heat on your financial goals and light
Speaker 1: the way to a brighter, more secure financial future. And
Speaker 1: as always, please remember that my content is general in
Speaker 1: nature and educationally based only. All right, let's get started.
Speaker 1: So today we're diving into a topic that is on
Speaker 1: everyone's mind right now. Exactly how much money do we
Speaker 1: really need to feel safe? Or even Dare I say
Speaker 1: rich in retirement. It's an age old question, and despite
Speaker 1: various so called financial experts, I am here to tell
Speaker 1: you that there is no one size fits all number.
Speaker 1: Some of these so called financial experts like to state
Speaker 1: numbers like thirty two thousand dollars a year for singles
Speaker 1: and forty six thousand dollars a year for couples, whilst
Speaker 1: other financial experts like to state fifty two thousand dollars
Speaker 1: per rounum for single people and up to seventy three
Speaker 1: thousand dollars pround for couples. And then there are the
Speaker 1: those financial experts who simply recommend aiming for approximately seventy
Speaker 1: percent of your take home pay. Now. I don't know
Speaker 1: about you, but there aren't many people I know right
Speaker 1: now who are actually living a comfortable life and actually
Speaker 1: surviving even on one hundred percent of their take home
Speaker 1: pay right now with the rising cost of living. So
Speaker 1: hearing these numbers ranging between thirty two thousand dollars a
Speaker 1: year and seventy percent of your take home pay really
Speaker 1: leaves alarm bells ringing in my head very very loudly.
Speaker 1: Here is the truth, the cold hard truth. There is
Speaker 1: no absolute number. Financial needs are very personal to your
Speaker 1: circumstances and your spending habits. However, as mentioned, what worries
Speaker 1: me about these financial expert estimates is that they are
Speaker 1: dangerously low and in my opinion, don't leave much or
Speaker 1: any form of comfortable lifestyle. And if you aren't familiar
Speaker 1: with who I am and my content, I am a
Speaker 1: financial planner who is very protective of your financial situation
Speaker 1: and your financial future. To me, these numbers don't spell
Speaker 1: out financial wellness. They spell out poverty. I would much
Speaker 1: rather you overestimate how much you need, allowing you to
Speaker 1: be far more well prepared and retire with greater freedom
Speaker 1: and peace of mind, rather than discover during retirement, in
Speaker 1: the thick of retirement, that you actually don't have enough
Speaker 1: to live the life that you want and you are
Speaker 1: left stuck panicking watching your wealth erode away at a
Speaker 1: rapid speed, where you no longer have the same energy
Speaker 1: that you have today. You no longer feel sharp in
Speaker 1: the brain, you no longer feel like you're up to
Speaker 1: speed with the latest education and training. This potentially leads
Speaker 1: you feeling alone, vulnerable, and to a certain degree, worthless.
Speaker 1: I do not want that for you. So today's episode
Speaker 1: is not about freaking you out, making you stressed, anxious,
Speaker 1: or worried. Far from it. What today's episode is about
Speaker 1: helping you gain a clearer idea as to how much
Speaker 1: money you need for your retirement. You see, once you
Speaker 1: have a defined goal, that is, you know how much
Speaker 1: money you need, you can then start building wealth immediately,
Speaker 1: moving closer to that goal with each step, and ensuring
Speaker 1: that every single dollar that you earn is actually redirected
Speaker 1: towards your financial goals in a far more efficient way
Speaker 1: where you can actually see and feel the shifts and
Speaker 1: breakthroughs as that goal becomes a greater reality for you.
Speaker 1: So that is the purpose of today's episode. And as
Speaker 1: one of my favorite financial quote goes, and this is
Speaker 1: by Denise Stufferphil Thomas, money loves definition and clarity. I
Speaker 1: know for myself personally, when I have a goal, a
Speaker 1: really clearly defined goal with a correct deadline, the game
Speaker 1: plan that is formed shortly after feels so much more durable, manageable,
Speaker 1: and achievable. All right, So this is where we get started.
Speaker 1: Step one. Understand your personal circumstances and your spending needs.
Speaker 1: How much money do you really need to live comfortably?
Speaker 1: The answer is it depends. Financial needs are highly personal
Speaker 1: and they cannot be averaged out. Unfortunately, those financial experts
Speaker 1: are giving you dangerous information and misleading you to a
Speaker 1: certain point. I don't want you to average out your life,
Speaker 1: because you are worthy and deserve so much more. The
Speaker 1: amount of money that you need for your comfortable retirement
Speaker 1: varies greatly depending on your spending levels, your value system,
Speaker 1: and your goals and dreams. So I'm going to give
Speaker 1: you seven lifestyle questions right now to help work out
Speaker 1: how much money you need you want. So, by all means,
Speaker 1: pause this podcast this episode, Grab a piece of paper
Speaker 1: and a pen and just quickly jot down some of
Speaker 1: your answers as I go through these questions with you
Speaker 1: right now. All right. Question one, where do you want
Speaker 1: to live when you retire? Now, this may seem like
Speaker 1: an odd question, but we need to think about it.
Speaker 1: We all know that if you live in a city,
Speaker 1: your cost of living tends to be a lot higher
Speaker 1: than say, someone living in a regional town. However, if
Speaker 1: you live in a regional town, what is the cost
Speaker 1: of living looking like there? And do you need to
Speaker 1: factor and transport so that you can get between the
Speaker 1: regional town and a city to see family and friends,
Speaker 1: or to access certain infrastructures such as hospitals, or perhaps
Speaker 1: you would like to maybe look at retiring and living overseas,
Speaker 1: no problem. What does that cost of living look like?
Speaker 1: And what is a system look like there? These are
Speaker 1: all things you need to just think about, or at
Speaker 1: least start thinking about. Question two. Will you be renting
Speaker 1: or will you still have a mortgage when you retire
Speaker 1: or will you actually own your home outright by retirement date. Now,
Speaker 1: this is an important question because it will obviously impact
Speaker 1: how much money you need. Obviously you've got a factor
Speaker 1: in rent that is going to mean that you need
Speaker 1: a bit more income than someone who owns their home outright.
Speaker 1: But that doesn't mean that you are scot free if
Speaker 1: you own your home outright, or even if you actually
Speaker 1: have a mortgage, because you need to factor in those
Speaker 1: maintenance costs that tend to be attached with property that
Speaker 1: you wouldn't necessarily incur if you're renting. And this is
Speaker 1: not just basic maintenance like a fresh coat of patents
Speaker 1: and new carpet every seven years or so, but what
Speaker 1: potential modifications do you need to make your home so
Speaker 1: that you can continue on living it and it suits
Speaker 1: your needs. All these little things really do add up.
Speaker 1: You need to know this so you can work out
Speaker 1: the correct number, the true number for yourself. Question three,
Speaker 1: what does your current cost of living add up to?
Speaker 1: And are you happy with this same lifestyle quality and
Speaker 1: retirement or do you actually want more? Now? There is
Speaker 1: no wrong or right answer here. I just want you
Speaker 1: to start thinking about these things so that you know
Speaker 1: and understand what you want and we can start working
Speaker 1: towards achieving this. And as sort of things you consider
Speaker 1: here are do you as someone who likes whining and
Speaker 1: dining in a new restaurant each week, or perhaps you're
Speaker 1: someone who knows that they need to replace cars every
Speaker 1: five years or seven years? And what about appliances? You're
Speaker 1: going to need a new fridge, washing a machine. All
Speaker 1: these little things add up. What about shopping clothes, those
Speaker 1: sorts of things, giving money to charity? All these come
Speaker 1: into play. So think about what does your current lifestyle
Speaker 1: look like? Is that the same lifestyle that you want
Speaker 1: for retirement? Is it less? Is it more? Just think
Speaker 1: about it. Question four do you plan to travel during retirement?
Speaker 1: If so, how much and at what cost? International or domestic. Previously,
Speaker 1: when I've sat down with clients to talk about retirement
Speaker 1: income and how much they really need, we would always
Speaker 1: go through the cost of travel. Do you want an
Speaker 1: international holiday one per year or do you want two
Speaker 1: domestic holidays per year? There's no wrong or right answer.
Speaker 1: As I said, you need to think about what does
Speaker 1: that look like? How much will that cost? Will that
Speaker 1: involve traveling on frequent flyer points and staying in youth
Speaker 1: hostels or backpacking, or will that involve business class flights
Speaker 1: and staying in luxurious hotels? Do you want to go
Speaker 1: on a holiday once a year or twice a year?
Speaker 1: Think about the cost of this and think about what
Speaker 1: is important to you and what you would value, especially
Speaker 1: after so many years of working so hard. Question five,
Speaker 1: how much emergency money do you need? Now? This is
Speaker 1: a question not just for people who are approaching retirement
Speaker 1: or in retirement, but absolutely everyone. And I do have
Speaker 1: an older episode that's focused purely on helping you w
Speaker 1: work out how much emergency money you need. But to
Speaker 1: remind everyone, there is no magical formula and there is
Speaker 1: no perfect, one size fits all number. How much money
Speaker 1: you need that is emergency money? You need really does vary,
Speaker 1: and it varies depending on your financial situation, your financial responsibilities,
Speaker 1: what insurance policies you already have in place, and the
Speaker 1: excess attached to those insurance policies, what safety nets you've got,
Speaker 1: All those sorts of things come into play. But for
Speaker 1: anyone that is approaching retirement or in retirement, generally speaking,
Speaker 1: I would recommend using my sleep Well at Night strategy,
Speaker 1: which is where you have two years worth of living
Speaker 1: expenses set aside in a separate savings account for peace
Speaker 1: of mind. Now, the reason why I recommend two years
Speaker 1: worth of living expenses is assuming that your money is
Speaker 1: invested and you're living off, for example, dividends through shares.
Speaker 1: If the market is to have a natural correction pullback
Speaker 1: even a recession, history shows that it takes on average
Speaker 1: eighteen months for the market to recover. Now, by having
Speaker 1: two years worth of living expenses, what that essentially means
Speaker 1: is is you don't need to worry about having to
Speaker 1: seal anything in your portfolio. You can literally leave your
Speaker 1: portfolio as is, let nature take its course and live
Speaker 1: off that hash supply for the next two years, buying
Speaker 1: time for your portfolio to recover and get back to
Speaker 1: what it was previously, so you're never forced to crystallize
Speaker 1: a loss, which is something you always want to avoid doing.
Speaker 1: And not only have we got two years, which is
Speaker 1: six months more. It's a great piece of mind to
Speaker 1: know that you've got that additional buffer, hence sleep well
Speaker 1: at night. Name tag question six. How long do you
Speaker 1: expect your retirement to last? Now? I know this is
Speaker 1: a very morbid question, but it's an important one. So
Speaker 1: people who are retiring now might think that they will
Speaker 1: only need twenty years worth of income, but if medical
Speaker 1: technology continues, they may actually end up living well into
Speaker 1: their nineties. So instead of needing twenty years worth of income,
Speaker 1: they actually need to start thinking about having thirty years
Speaker 1: worth of income. These are the important things to think
Speaker 1: about right now. Also, on that note, are you happy
Speaker 1: for your retirement money to be funded solely from your
Speaker 1: superannuation via say an allocated pension so that you are
Speaker 1: able to make the most of the tax savings that
Speaker 1: are under current legislation. Again, this is an important question
Speaker 1: because this may mean you can actually have less money
Speaker 1: saved up or invested in your superannuation or allocated pension
Speaker 1: because of that tax efficiency that tax savings could save
Speaker 1: you twenty thirty forty thousand dollars a year in income tax,
Speaker 1: which means that money has greater longevity. So this is
Speaker 1: why I always bang on and say SUPER is sexy.
Speaker 1: It is so incredibly tax effective both today and well
Speaker 1: into the long run. But of course, always get personal
Speaker 1: advice because there are art restrictions with SUPER. And then finally,
Speaker 1: question seven, do you want to leave money for your
Speaker 1: estate or loved ones that is an inheritance or are
Speaker 1: you happy to literally spend absolutely everything and leave this planet,
Speaker 1: this universe with nothing. Again, these are important questions, particularly
Speaker 1: when we look at the younger generations coming through and
Speaker 1: the cost of property. A lot of people understand that
Speaker 1: there is no way that their loved ones, their children,
Speaker 1: and their grandchildren are going to be able to get
Speaker 1: their foot in the door of the property market without
Speaker 1: inheriting some money. So for some people this is very important.
Speaker 1: They want to be able to leave a deposit. Or
Speaker 1: perhaps it's not even about property, it's about educational costs.
Speaker 1: This for some people is very important and it may
Speaker 1: be important to you, but it may not be. But
Speaker 1: you need to ask yourself and think about this and
Speaker 1: these lifestyle choices are just starting points to get you thinking.
Speaker 1: You also need to take into consideration things like healthcare needs,
Speaker 1: potential medical expenses. We might have an accident, you might
Speaker 1: get ill, you might need to travel overseas to get
Speaker 1: a certain type of treatment, you may need to invest
Speaker 1: in alternative treatment, and of course where you live. All
Speaker 1: of these things can significantly impact your required retirement savings
Speaker 1: or even better, required retirement investment portfolio. All right, let's
Speaker 1: move on to step two. Grab your calculator. Once you've
Speaker 1: written down your answers, grab a calculator and start adding
Speaker 1: up what the annual cost of this lifestyle would actually
Speaker 1: look like. Don't be afraid to round things up. You
Speaker 1: can use your current living expenses as a baseline. If
Speaker 1: you're struggling a little bit, that's okay, But just remember
Speaker 1: that these are going to be more of estimates and
Speaker 1: just a rough guide than actually exact numbers for you.
Speaker 1: And then from there you can add or subtract from
Speaker 1: that number based on your retirement plans. So, for example,
Speaker 1: if your current lifestyle excluding mortgage repayments, costs say eighty
Speaker 1: thousand dollars per year, and you want to add, say
Speaker 1: an international holiday at SA twenty thousand dollars per anum,
Speaker 1: and your new annual expenses would then be looking at
Speaker 1: around about one hundred thousand dollars. However, if you plan
Speaker 1: on moving to, say a regional town on the coastline
Speaker 1: quite a life where the cost of living might be cheaper,
Speaker 1: you might want to deduct say five thousand dollars a
Speaker 1: year from that number. And if assuming your mortgage is
Speaker 1: paid off, you still might want to allocate, say ten
Speaker 1: thousand dollars per annum for home maintenance. Now, already we're
Speaker 1: sitting at a required annual income of one hundred and
Speaker 1: five thousand dollars per annum after tax. Now for emergency savings.
Speaker 1: If you like my idea of the sleep well at
Speaker 1: night strategy, you might want to allocate two hundred and
Speaker 1: ten thousand in a savings account which covers two years
Speaker 1: worth of those living expenses at one hundred and five
Speaker 1: thousand dollars per annum. And you are aware of medical technology,
Speaker 1: and you're feeling fit and strong and healthy and take
Speaker 1: good care of yourself, you might want to assume that
Speaker 1: life expectancy is probably going to be around about mid
Speaker 1: nineties for your so you're going to need about thirty
Speaker 1: years with a retirement income. And in this example, let's
Speaker 1: say we want to lead one million dollars in today's
Speaker 1: dollars for our children or grandchildren. Now that one million
Speaker 1: dollars in today's terms is actually going to be about
Speaker 1: two point one million dollars in thirty years time, assuming
Speaker 1: an average inflation rate of two point five percent per annum.
Speaker 1: See how we now know numbers. We've got a clearer
Speaker 1: idea as to how much money we really do need.
Speaker 1: Exploring these numbers, that is, investing time. Exploring these numbers
Speaker 1: gives you a much clearer picture of what you really
Speaker 1: need to start planning for. And as I said, it's
Speaker 1: better to discover this sooner rather than later, which is
Speaker 1: exactly why I'm sharing this episode with you right now.
Speaker 1: All right, now we've got some ideas about numbers, let's
Speaker 1: calculate the true number. Step three. All right, now, we
Speaker 1: know in our example that we want one hundred and
Speaker 1: five thousand dollars per ADAM after tax. Again, assuming we're
Speaker 1: using an allocated pension here, which is currently tax free
Speaker 1: under current legislation, we need two hundred and ten thousand
Speaker 1: dollars in emergency money, and we want our money to
Speaker 1: last approximately thirty years and we're happy, as I said,
Speaker 1: to live off superannuation through an allocated pension. Now from
Speaker 1: this we can start to look at actually a net
Speaker 1: figure to work towards as a goal. So the next
Speaker 1: step is now to use a retirement draw down calculator.
Speaker 1: I have linked my favorite one in the podcast notes
Speaker 1: for you, and please know that we will be adding
Speaker 1: one to the Sugar Mama website soon, but for now,
Speaker 1: if we assume an average starting account balance of around
Speaker 1: two point one eight million dollars, drawing an annual income
Speaker 1: of one hundred and five thousand dollars adjusted for inflation
Speaker 1: each year, so that that means that that one hundred
Speaker 1: and five thousand dollars each year will actually increase by
Speaker 1: two point five percent, so you're never going backwards. You
Speaker 1: can keep up with the rising cost of living. And
Speaker 1: assuming an average annual net return of six point five
Speaker 1: percent per annum, these funds should actually last around thirty years.
Speaker 1: But guess what, it actually leaves just over two point
Speaker 1: one million dollars in super for your estate. So there
Speaker 1: you have it, two point one eight million dollars in super.
Speaker 1: If you want one hundred thousand dollars a year or
Speaker 1: one hundred and five thousand dollars per annum, and to
Speaker 1: be able to leave the equivalent of today's one million
Speaker 1: dollars to your estate. Now, if we add back in
Speaker 1: that two hundred and ten thousand dollars for emergency money,
Speaker 1: this means in total you need approximately two million, four
Speaker 1: hundred thousand four retirement. That is two point four million
Speaker 1: dollars for retirement. Interestingly, though, if you didn't actually want
Speaker 1: to lead anything for your estate, you would only need
Speaker 1: one point eight five million dollars in super plus your
Speaker 1: emergency fund. However, here's the interesting part that three one
Speaker 1: hundred and forty thousand dollars difference in retirement balance can
Speaker 1: actually make a huge difference in comfort, wealth, and security,
Speaker 1: as this three hundred and forty thousand dollars can actually
Speaker 1: serve as your two million dollar a state, or as
Speaker 1: a greater sense of comfort and peace of mind. If
Speaker 1: the rising cost of living gets out of hand again,
Speaker 1: or something happens to you and you need to eat
Speaker 1: into your wealth, you've got a safe buffer there for yourself. Now,
Speaker 1: this really highlights the importance of knowing your true correct
Speaker 1: and even best numbers so that you can start preparing
Speaker 1: now and make the most of every single opportunity today.
Speaker 1: Wouldn't you rather know this now, that what you need
Speaker 1: more than discover it when it's too late. As I said,
Speaker 1: we're older, we're slower, we're more tired, we're more achy.
Speaker 1: Know this now. And if you are listening to this
Speaker 1: and thinking, oh, my goodness, I need a lot more
Speaker 1: money in superannuation than I originally thought. Great, I'm glad
Speaker 1: you're listening. I'm glad you're starting to wake up and
Speaker 1: realizing the dangers of those financial experts. So your next
Speaker 1: question is, Okay, great, Canna, I now know, but how
Speaker 1: am I possibly going to get two point four million
Speaker 1: dollars in super? All right, don't panic, don't worry. I've
Speaker 1: got your back. I'm here for you. In next week's episode,
Speaker 1: I'm going to be breaking down all the different ideas
Speaker 1: and strategies to help you make this happen to the
Speaker 1: best of your ability. I'm going to be exploring lots
Speaker 1: of different ideas that you may have never heard about
Speaker 1: or thought about before, so that you actually understand this
Speaker 1: is possible. If you start working on your superannuation goals.
Speaker 1: So again, please make sure that you are following this
Speaker 1: show so that you know when this episode comes out
Speaker 1: next Monday morning. All right, let's move on to the
Speaker 1: final step, step four, and that is the importance of
Speaker 1: professional financial advice. A good starting point for every single
Speaker 1: of Australian, regardless of your financial situation, sure or not,
Speaker 1: is to always seek professional financial advice, not financial experts,
Speaker 1: not financial influencers, financial planners, experienced qualified and licensed financial planners,
Speaker 1: especially regarding retirement spending and understanding how the age pension
Speaker 1: and allocated pension may help you achieving your retirement goals
Speaker 1: and dreams. A financial planner can actually sit down with
Speaker 1: you and help you design and create a personalized financial
Speaker 1: plan that aligns with your goals, your lifestyle, your deadlines,
Speaker 1: and your risk and your longevity expectations. A financial planner
Speaker 1: is not just about helping you pick the right investments. Yes,
Speaker 1: they will help you with that and do that work
Speaker 1: for you, but most of the value from a financial
Speaker 1: planner actually comes in creating the strategy and creating a
Speaker 1: strategy that allows you to efficiently achieve your goals. And
Speaker 1: in fact, I have to say another value of financial
Speaker 1: plan is and the one that is quite often forgotten
Speaker 1: about or not even realized is when a financial planner
Speaker 1: can actually stop you from making a disastrous mistake or
Speaker 1: a decision that's going to come with great regret or consequences.
Speaker 1: This is why you need to see a financial planner.
Speaker 1: And I will say, the legislation does change, it does
Speaker 1: get updated, but also at the same time, different opportunities
Speaker 1: present themselves, different loopholes, that is, legal loopholes will also
Speaker 1: come up where a forward planning, proactive financial planner knows
Speaker 1: your situation, knows your goals and actually can say, hey,
Speaker 1: we need to tweak and change the strategy. This will
Speaker 1: actually help you significantly, make a big difference and save
Speaker 1: you time and money. This is why you need to
Speaker 1: see a financial planner for your retirement planning all right.
Speaker 1: In summary, the amount of money you need to feel
Speaker 1: safe or even rich and retirement is deeply personal. It
Speaker 1: is influenced by your unique circumstances and goals. It is
Speaker 1: a central to prepare well ahead, to start thinking about
Speaker 1: what you want, what you need, and what you value.
Speaker 1: And then, of course, always if you feel ready, seek
Speaker 1: professional financial advice to boost your confidence, make sure that
Speaker 1: you are informed, educated, and have all the information you
Speaker 1: know to make educated decisions that are going to benefit
Speaker 1: yourself your mental health as well as your financial wellness,
Speaker 1: and ensure that you're on the right track. Remember, financial
Speaker 1: empowerment starts with understanding your needs and taking proactive steps
Speaker 1: towards achieving your goals. All right, thank you everyone for
Speaker 1: listening to today's episode on Sugar Mama's Fireplay. If you
Speaker 1: found this episode helpful, please share it with your friends
Speaker 1: and leave a review. Please don't forget to follow us
Speaker 1: on Instagram at sugar Mama tv for more tips and
Speaker 1: inspiration on empowering your financial future. And I will see
Speaker 1: you next Monday, but we'll talk about how to build
Speaker 1: this two point four million dollars superinnuation treasure chest for
Speaker 1: your long, luxurious and fabulous retirement chaufinet