Last month I mentioned I would fill you in on some scary, maybe unwelcome or possibly head in the sand don’t want to think about that sort of stuff tit bits.
So the subject today is retirement or more recently known as succession planning. Which is accountant speak for retirement. You hear the words “you must be looking forward to your retirement, all that time to yourself no pressure from work, you lucky …………” Now for some those words are an absolute dream but for most they are not, why? Because for the past 50 years they have got up, gone to work and filled their days with work. That’s all they know 5, 6 or 7 days a week then they come home and do more work shuffling paper. How are they going to fill all that time? Golf, fishing, gardening, grand kids there’s only so much a grown adult can take surely. Now this could be considered as a nice problem to have, time on your hands and can be made an awful lot nicer if there was an abundance of dollars on hand. Which now brings up the real issue of retirement, can you actually afford to retire?
What is the dollar value for retirement? There isn’t a set value it depends on everybody’s individual situation. Do you have debt, do have a mortgage, do you have independents, do you live in town or in the country and the list is endless. According to our successive governments you can live on a single pension of approximately $12.5k, reality says we can’t. So here’s your homework, write yourself a list of everything you spend non business for the next month and you need to include everything. Then add in the things that the business pays for which will become your expense when you retire like mobile phone, petrol, printer ink and again the list will be long. Then cross out the items which you could do without but be realistic here, you have worked for 50 years to get to this stage in life why should you spend the next 20 plus living below the poverty line. You should now have an average monthly figure on what you need to retire. Sorry not quite finished yet, have you accounted for the annual bills or the quarterly bills, rates, insurance etc. what about entertainment, movies, shows meals out. What about birthdays and the retail bliss of Christmas. Do you want a holiday every year? Now we come to capital expenditure will all your house contents last until you depart, if your house is like mine dishwashers seem to be a disposable item these days two in 7 year’s (gripe over). Will your car be your last? Maybe but don’t forget the running costs of services, tyres, rego and break downs. Dare I even mention how much that boat cost you “no not the boat” you scream “what’s the point of retiring if you’re going to take my boat away?” For all these extras above the monthly figure you can only guesstimate but again be realistic.
So for an annual sum what have you got $50k, $70k, $100k, $150k? You could have any one of them and some probably more, as I said it depends on your individual situation. With no mortgage or debt at $50k this is only $1000 per week. Piece of cake you say we can live on that, do you homework and then think again. So your next question is “have I got the means to generate this some for the next 20-30 years if I am not working”. Frightening fact, $75k times 25 years equals $1,875,000, lotto’s looking good right now but make sure you add in the price of a weekly ticket. I have a spread sheet if you would like it to help you calculate the dreaded number just call on 099454880. Next month we will look at ways to help generate these funds.