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You don't need a million bucks to retire background image

You don't need a million bucks to retire

You don't need a million bucks to retire icon

Fun Fact #1: You don’t need a million bucks to retire

We know what you’re thinking.  “How much do I need to retire?”

As retirement specialists, it’s the most common question we’re asked.  As people reach middle age, usually at about age 50, they start turning their minds to their retirement. 

What starts out as curiosity quickly turns into anxiety when they start doing the numbers.

We blame the retirement calculators on the super fund websites.   Plug in some numbers and you’ll soon learn that you don’t have anywhere near enough money.  Undoubtedly, the calculator will tell you that you need a capital lump sum of more than a million dollars, and probably closer to $1.5. million.

The super funds call it ‘retirement adequacy’. The trouble is, most of us don’t have any.

Bridging the gap feels like an impossible task.  It feels too painful to think about, so we disengage from our financial decisions and put our heads in the sand.

But these retirement calculators are over-simplified and wrong.  They’re wrong for a whole bunch of reasons.   


Our age pension safety net

Firstly, they don’t take into consideration the ultimate financial safety net; our age pension system.  For a pensioner couple, this can be more than $36,300 a year.  While most older Australians receive the age pension, not everyone gets that much.  Your financial assets interact with the Social Security system and reduce your entitlements under the means test.  But even couples with up to $860,000 in financial assets in addition to the family home are eligible for a part pension.   


Retirees are smart

Financial calculators assume that you’ll keep spending the same amount year on year, increasing with inflation.  In our experience, we’ve never seen a retiree blindly spend at the same rates while watching their assets deplete.  Retirees are smarter than that.

Research from CoreData uncovered what financial advisers already know to be true. More than four in five people can differentiate between their financial needs and their discretionary wants.  Further, when their retirement starts going off track, they’re willing to tighten their belts and cut down on discretionary expenditure.


Most people have humble ambitions

A funny thing happens when we retire.  A few months into retirement, we start feeling more confident about our finances.  That’s because we are still able to do the things that are most important to us. 

Sure, we like to travel, but the for the most part we just enjoy doing the same things we’ve always done.  We enjoy exercise, learning new skills, spending time with our family and friends, and contributing to our communities and the causes we feel passionate about. 

So, be skeptical of the super funds who are trying to sell you more super.  You don’t need a million dollars in super for a comfortable retirement.

No matter where you are financially, it’s always better to positively engage with your financial decisions.  There are always options to enhance your circumstances.  If you’re planning to retire, there are ways to achieve it.  It’s not a matter of ‘if’ but ‘when’. 


Michael Bowman and James McMaster are co-founders of When Financial Solutions

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