Wanna be like Richard and Sally who will retire on $80k pa?

Are you a fan of Bad Boys? I am and love these movies.

Will Smith plays a cop named Mike. Inheriting a large trust fund, he is able to afford all the nice things in life. Nice apartment, nice clothes, nice car and pretty much anything he liked. But he always wanted to be a cop, it was his childhood dream.

Working with his partner, Marcus, there’s a scene where Marcus needs to house a witness. As Marcus is a family man, living in a suburban home, he couldn’t take the witness there.

So a lightbulb moment comes to him and he takes the suspect to Mike’s apartment. As part of the plot, he’s forced to take on Mike’s persona.

What did he do, dresses in Mike’s clothes, thinking if he’s going to be like Mike he may as well dress like Mike.

Running into Mike in the cop station, Marcus starts berating Mike with “I wanna, I wanna be like Mike, POW…”. To the disgust of Mike…

Retirement is no different.

You might be witnessing friends retire and watch as they have time freedom to go off and live life. You see them traveling to exotic destinations. They are dining out on a regular basis. They have got the time to spend on their hobbies and interests.

Ultimately having the freedom of time to do what they want when they want.

You may be witnessing friends become ill as they enter this phase of their life. Perhaps preventing them from pursuing what they wanted in retirement.

As you witness this, you wonder whether the same things are going to be possible for you. Knowing you have limited time to get your finances in order if you want to enjoy a good life in retirement.

But here’s the thing. It doesn’t come without planning and hard work.

You can’t drift into retirement thinking it’s all going to be okay without planning.

Doing this puts you at significant risk of running out money. Meaning you don’t have the financial resources to live the lifestyle you’ve only dreamt off. You don’t want to be simply existing.

That’s no way to live in your golden years. Instead you want to live a good life.

Richard and Sally, wanting to retire, had been pondering their financial future for quite some time. Despite their efforts, they found themselves in a cycle of uncertainty and lacked clarity regarding their retirement plans.

It didn’t help that they were receiving conflicting information from financial advisers they had been speaking to, combined with mixed messages from their friends.

They were on the proverbial treadmill, leaving them feeling lost, wondering whether they’d be able to find the answers they were looking for, let alone retire with confidence.

Richard’s and Sally’s frustrations…

After multiple consultations with financial advisers that left them more confused and frustrated, Richard and Sally were struggling to navigate the complexities of planning their retirement.

The focus of the financial advisers they’d been speaking to was on product and investment solutions. Not addressing their main concerns and challenges around planning their retirement.

This compounded their frustration, leaving them feeling overwhelmed and unsure of their next steps.

You can’t make retirement decisions solely based on products or investment solutions. Retirement planning is more complex and detailed than that.

Retirement Challenges Richard and Sally Were Struggling With

Being salary and wage earners their whole life, they had saved hard through their working life.

However, Richard’s health was not what it used to be after many decades of stressful work. He no longer had the drive and enthusiasm for his work.

It became a priority as he faced the reality of friends around them falling ill and in cases passing away before their eyes.

This was a wakeup call for them. Highlighting that time was precious and precious time was slipping away before their eyes. Realising they didn’t know how many good years of health they had was the driving motivation to retire sooner rather than later.

Over their working lives, they’d largely been self directed in terms of building their wealth. However, they were aware they’d probably missed some opportunities to improve their financial position.

Another driver for them to seek advice. To make sure they were set up comfortably to generate enough income to fund their retirement adventure.

They had approx $1.5m of assets spread between super and an investment property. However, they had no idea whether they had enough to retire or how long they needed to work before retiring.  

Nor how they needed to structure their investments to generate an income of $80k pa.

Preferring to retire earlier if they were in a financial position to do so. Knowing they did not know how many active years they’d be able to enjoy in retirement.

While their investment property had been good to them in terms of capital growth. They were now at a stage where they’d grown tired of managing and maintaining it. Yearning for a more laid back, less stressful lifestyle.

They had held off on BIG travel adventures, postponing them until they were retired. While also wanting freedom to explore parts of Australia. Becoming tired off work, they were desperate for more time to relax and pursue other interests.

The problem was, they didn’t know if they had enough money to pay for their lifestyle for the rest of their life. Fearful of making a mistake and running out of money if they didn’t make the right financial decisions.

When we’d met Richard and Sally, they were at wits end, just wanting some answers.

They’d been avid readers of our posts and book “Enough”. Taking the initiative, they arranged a short chat over the phone and after hearing how we worked wanted to get things sorted sooner rather than later.

What did Richard and Sally want to achieve out of retirement?

Many look at retirement in a vacuum. It generally starts with we have these assets and super and that’s where they start.

Without a thorough exploration of what you want out of retirement, it’s extremely hard to make financial decisions confidently. It’s a little like throwing a dart at a dart board with a blindfold on.

You might hit the bullseye and you might not.

Many put the cart before the horse…

With the right framework you can unlock a retirement chock-a-block full of experiences and memories.

As we explored what Richard and Sally wanted out of retirement, it became very apparent what their priorities were.

#1 Work Optional – For Richard, while he wanted to give it all up, it was a balance between giving up and having sufficient funds to fund retirement. He wanted to know at what point he’d be able to give up work and have sufficient financial resources to fund their lifestyle post work.

Sally, working on a part-time basis, was happy to continue for a little while longer. However, if they were able to, she’d give it all up tomorrow.

#2 Have Confidence They Would Have Enough – They had accumulated a reasonable amount of assets, but still had doubts whether it would be enough to sustain the lifestyle they wanted in retirement. They definitely didn’t want to risk running out of money. They had too many dreams they wanted to realise.

#3 Become More Active and Healthy – A main driver of retiring was to spend more time freedom to do the things they hadn’t had time for. Seeing other people retire before them highlighted what they were missing out on.

#4 Be Socially More Active – Watching friends have the freedom to go to lunch during the week was a motivator driving retirement. They wanted to get involved in activities their friends of similar ages were pursuing.

#5 Master New Skills and Knowledge – Work prevented them from pursuing other interests outside of work. They had a number of things they wanted to pursue and keep their mind active in their retirement years.

Have you considered what it is you want to achieve over the next 5, 10, 15, 20 years or more?

Life is not a rehearsal. You have limited time and health to be able to do all the active activities you have planned for retirement.

Retirement Feasibility

An important yet overlooked aspect of retirement planning is understanding whether you can afford the lifestyle you want in retirement.

Many use unrealistic return assumptions, think they are not going to live a long life and don’t know what they don’t know.

For Richard and Sally, while they had a reasonable sum of assets, if they were to stay the current course. Using their super and income from their investment property they incur a significant shortfall around age 79. Not ideal.

Knowing this, we collaborated with Richard and Sally to build out their feasible retirement plan. This involved the sale of their investment property in a number of years to top up their super.

Not only that, they were happy to reduce their spending from age 80 by 25%, to $60k in todays dollars.

That was just one of their blindspots which they were unaware of if they wanted to enjoy a retirement without spending restrictions and living in poverty.

Exposed Risks and Blind Spots 

• Running Out of Money – Had they continued the course they were currently on, they’d run out of money around age 79.

• Investment Risk – Not understanding the actual risk you are taking is common. Many see the returns without considering the risk. More often than not, you’ll feel the losses more in retirement as your assets decrease over retirement as you spend it.
• After completing their retirement feasibility assessment, we identified they did not need to take on the level of investment risk they were currently taking. In fact they could reduce their investment risk by 20% with little to no impact on their investment returns.

After completing their retirement feasibility assessment, we identified they did not need to take on the level of investment risk they were currently taking. In fact they could reduce their investment risk by 20% with little to no impact on their investment returns.

This will mean, they will experience less movements in their investments through retirement, leading to less stress.

• Improving returns – by comparing their current performance with our evidenced based portfolio’s they would have been able to improve their returns by approximately 1%. That’s nearly $30k extra a year for the last 3 yrs if they’d come to us earlier.

• Retirement Income – they had no plan for how they were going to fund their retirement income. Like many, they were in a pooled option within their super fund (one investment with cash, fixed interest, shares and property).

Had they continued down this path, they would have churned through their super quicker than superman could fly to the moon. They were at risk running out of money sooner than they had expected.

We crafted a bucket approach to funding their income. Quarantining growth investments so they were not forced to sell when investment markets went down. This would also allow them to not worry about what investment markets were doing when they retire.

They’d still retire when they had planned as they had the right strategy in place.

• Leaving a BIG tip to the ATO – if Richard and Sally did nothing and they died early in their retirement, their super would go to their estate. Having a value just over $1m, they’d be tipping the tax office a whopping $150k on their way out the door.

We devised a plan which would take a number of years to implement to reduce this tip to zero.

The old saying, “you don’t know what you don’t know” was very true for Richard and Sally.

By diagnosing their whole situation, warts and all, we were able to identify the blind spots and exposed risks while putting plans in place to address and protect them from these risks.

Richard and Sally’s transformation from uncertainty to clarity, confidence and control over their retirement

For Richard and Sally, it was a remarkable transformation. When they came to us, they were confused and frustrated.

As we worked through a methodical framework, they started to see the light at the end of the tunnel. They had the support to make their own retirement decisions knowing what all their options were and collaborating to build out their feasible retirement plan.

This changed their perspective on retirement, now armed with newfound confidence. So much so, they’ve booked their first overseas holiday post retirement and are making new plans for life after work.

Important of Professional Guidance

Richard and Sally’s transformation serves as a poignant reminder of the importance of seeking expert guidance and tailormade solutions when navigating the complexities of retirement planning.

Their experience, like many other clients we work with, is a testament to the transformative power of proactive financial planning and personalised support in shaping a secure and fulfilling retirement.

No one retirement is the same, it’s the reason every retirement roadmap we craft is tailored to the individuals we work with.

Ready to embark on your own journey towards retirement clarity and confidence? Take the first step. Reach out today and book your own Retirement Clarity Call by clicking here.

We’ll hop on a call for a quick chat around the current retirement challenges you’re trying to resolve.

If there’s a good fit, we’ll book in a zoom call where we’ll complete a retirement mapping session to help you better understand your retirement gaps and brainstorm ways to close those gaps and retire with more clarity and confidence.

Glenn Doherty – CFP – Financial Planner | Retirement Planning Specialist |Retirement Planning Made Simple for aspiring happy lappers and avid travellers within 7 years of retirement

We work with people in Adelaide and around Australia virtually via zoom!

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