Hi, and welcome to this week's episode of Money with Alpha. Today, I'm going to talk about your retirement number. And while depending on where you are in your work life and life in general, your retirement might seem like a long way away, or it might be feeling awfully close and you don't really know if you're prepared for it. What are you even aiming for? What's the gap of where you are now to where you think you should be and where should you be? So many questions, and quite often it's because of the. So many questions that we tend to, like, just block it out and put it to the Future. And then five years pass, 10 years pass, and we're like, oh, my gosh, I really need to start to look at this now. I get quite a lot of people coming to me where they're like, oh, I really want to retire in 10 years, but I've no idea, am I close? What do I need? I need to knuckle down. I need to make sure I'm putting money into my retirement fund. All of this, and it's that, that big gaping question mark over, what does it even look like? What do I, how much do I need? All of this. And it's, it's simple and it can be as complex as you want to make it pretty much like anything in life, especially money, it can be really, really simple or we can overcomplicate it. So there's some simple ways to give you an idea at least. So I'm going to, I'm going to cover off on a few things today. The first thing is, what is your retirement number? How do you calculate it? What kind of lifestyle do you want? And then what's the impact on the decisions you're making today on your future and how quickly you are going to get to that retirement number? And there's, there's a lot of variables in all of this. So I will be talking about this at a, at a more high level, but it'll at least give you an idea of how to get where you want to go. So the first thing is, what is your retirement number? When people talk about this and you kind of like, well, what is, what does it mean? Like, do I, you know, what, yeah, what is my retirement number? Essentially, it's how much money you need to have set aside for retirement when you retire. And because retirement and this retirement will look different for everybody, some people are like, oh, I can't wait till I, you know, get to the retirement. I'm just, you know, like, Counting down the days, which my husband's a little bit like that sometimes. I mean, to be on some days are better than others. So some days he's loving what he's doing and other days he's like, oh my gosh, this is just so much. But for some people it might be very like a hard line. You know, I'm, you know, I'm going to retire when I'm 65 and that's it. I remember when I was working in accounting, the firm I was at, they had a retirement of 55. Some people work beyond that, but it really depended on what you wanted to do. And for some people it'll be, I'm going to retire from full time work, but I'm going to cut back down to part time. So I'm still going to be working and earning money. It just won't be as much. So you've really got to think about what it is that you want to do, what you're actually working towards, but you don't want to get to the position where you're like, I really want to retire when I'm 60, but I can't afford to, or I really want to retire when I am 50, but can I afford to? Or what do I need in order to afford it? So it's like money in general is going to afford you choice, but in order to have that choice, you need to have clarity over what you want your money to do for you. So I'm going to just touch on like the classic to when I get to 65, I'm going to retire completely and I just need to have enough money to sustain me for the rest of my life. And then that's the other thing too. What kind of lifestyle do you want in retirement? So there's, there's a few different things that you need to factor in and consider about you and what you want. And what you want may actually change a bit over time. You might have this like, hard and fast, oh, I'm going to retire when I'm 60 and that's it, I can't handle this any longer. And then the closer you get to that, you realize, oh, 60 is actually not that old. I don't know if I'm ready to like completely retire and you know, remove myself from the day to day of life. Maybe I do want to keep working a bit longer or, you know, maybe I can't. Like maybe your job is quite physical or it's very mentally or emotionally draining. I've got a few clients who work in in support and care work space. And they're like, I can't sustain this for, for the next, you know, 10, 15 years. I need to be able to factor in lessening my hours just so that I have more, more care time and like in terms of like self care and more recovery time because it's very physically, emotionally or men mentally draining. So it really depends on what you want. But that said, when you do start to reduce your income, whether it's completely or just, you know, incrementally, you need to have a look at what you need. So like I said, just for simplicity's sake, I'm going to say okay, hard stop and what do you need? So let's just assume that you stop working at the age of 65. And at the moment we look at, I don't know, it's not a particularly pleasant thing to think about, but life expectancy, you kind of have to kind of factor that into this calculation. So at the moment, one of the calculators that I've seen and that I like factors in 25 years which would be to get to the age of 90, which for, you know, life expectancy wise it really, you know, I think the average lifespan of a woman at the moment is around this 87 year mark in sort of Western world and 84 to 5 for men. So 90 is more conservative. So it's giving you a bit longer. I mean my grandmother, I had one grandmother who lived to 88 and another grandmother who lived until she was 92. And it's not even just age necessarily, it's also level of health and care. Like one grandmother lived at home until she passed and then another one ended up needing quite a lot of care, had dementia and also, you know, there was a lot of costs involved for her last few years. So we, you know, we're not going to go into that level of detail right now. We're just going to like generically try and figure out how much per year you would need over that 25 years. And again, this is very much where you're living in the world dependent and what kind of lifestyle you want that's dependent on that. There are some base level, kind of comfortable retirement figures that get put out by the Australian government. And that's around the, you know, the 50, 48, $50,000 mark for a single person and around $75,000 for a couple. So if you take that say 50,000 or 75,000 depending if there's one or two of you and you multiply that by your 25 years, you're going to come out to a figure. So you come out with like maybe 1.25 million, or it could be closer to 1.5 million. And that's sort of a rough guide of what you would need to have in your retirement account at the point that you retire, presuming that you're like completely cutting off work and you're not going to work anymore or earn any more money. That, and that's then also not taking into account, if you can have access to the age, pension, what kind of assets you've got, assuming that you've paid off all your debt by then as well, and that's just living expenses, not including debt repayments on a house. So there's a few other things to factor in, but it gives you an idea of the order of magnitude. And then you can start to look at what you've got right now, like in terms of the value of your home, taking away any debt that's on there right now, looking at what's in your superannuation or your retirement funds at the moment, any other kind of assets, investments, investment properties, remembering to take off the, any debt that you have on them, any other kind of assets that you have that have value. You might have some jewelry, gold, art, all of that. They're not particularly liquid, but if you sold them, you could get some money for them. Cars, you know, they can potentially be in there, depending on the car. My accounting brain says cards are depreciable assets and if you need something to move around, but at some point they'll come a point where you won't be able to drive anymore as well. So, and, but by then, will your car have much value to sell? So I tend to just kind of bring, fence the car, and to a certain extent, I kind of put the house to the side because you need somewhere to live. So you need to kind of look at it holistically, all of your assets, but then also put the house off to the side. There's the possibility that when you retire, you might want to sell that house and downsize and then you get some equity out of that home. So, for instance, your house is worth a million dollars, and then you sell it and you buy a unit for 500, you've got an extra $500,000 that you can put towards your retirement fund. So there's a few, few different variables that are in them, but it's good to have all that down on paper so that you can see it. So I always look at two things together. I look at your retirement number and then look at your net worth as well. And if you see what that looks like now and then you start to look at how things will grow. If you've got investments, have a look. There's some calculators online. If you don't know how to find them, just message me and I can send the links to you. Some calculators where you can calculate, you know, a potential return and what that will look like in 5 years, 10 years, 15 years even. So you can start to project what that will look like from a savings. Invest. Savings perspective. An investment perspective using different rates of return for those because they're going to, you know, investments typically will return you a higher return, percentage return than savings will. Especially at the moment in Australia, interest rates have just dropped a bit. So of course the amount you earn on savings has also dropped. So having having a look at how some of that can play out over time. Your superannuation, treat it like an investment. So you can use some calculators that will project what that can look like again. If you can't find them, let me know. The Money Smart website in Australia, it's a government website. They have some really good calculators on there for things like savings projections, superannuation projections and you can use a compound interest calculator to help you calculate some investment projections as well. And yeah, so they, and they come in, they're really handy too. They're pretty simple to use, quite handy as well to give you that, that view. And I always like to do it in five year increments. So have a look at what all your balances are right now, remembering to take debt off. And then have a look at the calculators to see what they'll look like in five years. And then have a look at what the calculator says you'll have in 10 years. And depending on your age and when you want to retire, you might need to do a 15 year view as well. And then if at 15 years is when you want to retire or at 10 years, look at what your overall net worth would be at that point and then go also keeping in mind that you've paid down a loan and hopefully you've got it to zero by the time you retire, then you can have a look at that overarching number, say that 1.25 or $1.5 million and go, oh, how far am I away from that? If you're on it or over it, yay, that's fantastic. If you're not there yet and There's a gap. I need to go back to have a look at some of what your spending habits are and go, okay, well if I can reduce some of my spending, like for instance eating out, I always find the two biggest buckets that I see is well three actually there's eating out insurances and mental like now on groceries is up there all retail. So eating out and groceries a little bit together and then you've got insurances and then you've got retail. So they're probably like the three main buckets that I see that generally have the most opportunity for saving or stripping back a little bit. The insurances is often quite just simply a negotiation or a phone call to your insurance company and say if you have all your insurances there's like okay, well what, what kind of loyalty discount can you offer me? What can you offer me at the moment and see what they come back with. You can have a figure in your mind and you can work towards that if you want and then see how you go. But if you don't ask, you're not going to get it. That's how they work. They're not going to just offer it to you, but they will offer you something if they think they might lose you. So it's unfortunately this is a, it's a mind game. Groceries and eating out groceries are. There's a few levers you can pull. I started to, to delve into this a few years ago where I really, really leaned into Costco and Aldi Strip to sort of our lower cost Australian supermarkets. And I love it now I actually really love their products. I shop from there primarily. I don't do. I do a little bit from some of the other supermarkets if I can't find the product that I'm looking for at the other two but I'll go there first. And I find on a per unit basis even with the annual fee, Costco is still a lot cheaper. So you just have to have storage space, both pantry and freezer and a big family. It works even better. So that's. And then eating out it's like can I especially. I mean I tell you Aldi these days has some really good like you can just like do the last bit of readymade like for instance I really like pads you from the local Thai place and we still like to support them and you know we'll probably have takeout from there maybe once a month but if I want to have something like that in the interim there's like these pre made kits and the ingredients are Actually pretty good in them. There's some coconut sugar and there's no extra preservatives apart from like salt. And then all you have to do is add in the meat or the seafood if you want to add that, other awesome veggies, and then the rest of it's in the packet. And the packet can feed at least two meals. And they're usually about $5.50 for the two meals plus the little extras. So you're looking at probably $10 for two really nice meals, which a takeout would be $40. So there's like $30 just on one meal that's gone. So it's amazing how when you start to get into that kind of habit mindset, it actually starts to really add up to hundreds, if not thousands of dollars a year. And that's hundreds or thousands of dollars you could be investing and, or saving to help bridge the gap to get to your retirement number. So it's really, really interesting when you start to see that value of compounding over time something that's like seemingly insignificant. When you add it up over time, it can literally make tens of thousands of dollars difference. Even paying down your mortgage fortnightly instead of monthly. If you have an offset account, it's a little bit different. But even just that can make such a big difference over time on the amount of interest that you pay and how quickly you pay off your loan. So that's why I'm constantly going on about, it's not the big changes and the big things that you do when it comes to money. It's the incremental little things consistently done together over time that makes the biggest impact. So have a look at what your retirement number is. So take how much you think you'll need per year. You can use that $50,000 for a single and $75 for a couple into account over 25 years. Get that number. Calculate out everything that you've got in terms of what you own versus what you owe and then do some of those calculations. 5, 10, 15. Like figure out when, what age you are now and when you want to. And if that's 10 years in the future, do that calculation in five and 10 years. If it's 15 years, do a 15 year view and then you can go, okay, well, what does that look like compared to that first retirement number? I'm pretty, I'm, I'm happy. I'm going to get there. Or you know what, I need to do a little bit more to help me get there. All right, let's go. To the budget and the cash flow and have a look at how I can strip a few things out that might give me maybe an extra five, ten grand a year to be able to compound over those five, 10 years. And oh my goodness, it's tremendous how that can, can start to. So hopefully that's kind of helped you figure out how to simplify at least that retirement phase. Because what will also happen is your lifestyle will start to change now and you can start to see, oh, I start to have a bit more power over my finances, my cash flow, my lifestyle. I'm liking this. I'm seeing some progress and you get momentum when you get some confidence and then we'll progress and then more confidence and more momentum and it really just literally compounds on each other. So that's where I find looking a little bit further out can actually help you a lot in the now as well. So I will leave you with that. There's, there's a little bit there. I will put some of the steps to what and some of the calculations I've spoken about into the show notes so that you can see them for yourself. If you, if you happen to be driving while you're listening to this and you can't write it down, I'll put all this in the show notes as well. And yeah, if you have any questions, please reach out. I'll put the links to those calculators in the show notes too, so that you can find them for yourself. And you can. I've got three main calculators that I use. One is the compounding interest one, which helps you with savings and sort of outside super investments, superannuation, balance forecasting, and then also a mortgage calculator that helps show you how more quickly you can pay down a mortgage if you pay a little bit extra over certain periods of time, if you're paying monthly, fortnightly, etc. And you can start to sort of have a little bit of a play with it and go, holy moly, I could be paying this loan off like five to ten years sooner just by doing potentially just $200 a month extra or $200 a fortnight, $400 a month extra payment on the, on the loan, unless you see this for yourself. And you know, generally speaking, a bank will not show you this because they want you to pay it off over the 25 years, whereas I would love you to pay it off over 15 years less if possible. So these calculates come in really handy to give you that visibility so that you can empower yourself decisions which is why I love what I do. So, yeah, hopefully that's really helped you kind of think about retirement and your future planning a little bit differently and empowered you to actually do some calculations yourself. And if you don't feel comfortable doing them, please reach out. Happy to help support you in that, too. I do have a one hour, or it's actually 90 minute financial future review. If you would like to actually sit down with me, I give you the tool that I use to calculate all of this. It has all the links in there. It's, it shows you where everything is. It does the 5, 10, 15 year view. And yeah, that's a $497 flat fee. So if you would like to do that, then please reach out. Okay. With that, I will let you enjoy the rest of your day and have a wonderful week.
