Crunching the numbers on retirement


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 tidbits.
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 — five, six or seven 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, grandkids — there’s only so much a grown adult can take surely. Now this could be considered a nice problem to have.
However, time on your hands can be made an awfully 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 you have a mortgage, do you have independents, do you live in town or in the country? The list is endless.

According to our successive governments, you can live on a single pension of approximately $12,500 annually — but reality says otherwise.
So here’s your homework. Write yourself a list of everything you spend on non-business items 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, such as mobile phones, petrol, printer ink etc.

Then cross out the items which you could do without. Be realistic here — you have worked for 50 years to get to this stage in life so why should you spend the next 20-plus living below the poverty line?

You should now have an average monthly figure that you need to retire on. Sorry, we’re not quite finished though. Have you accounted for the annual bills or the quarterly bills such as rates and insurance?

What about entertainment, movies, shows and 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 seven years (gripe over). Will your car be your last? Maybe, but don’t forget the running costs of servicing, tyres, rego and breakdowns.

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, for some, probably more — 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.

The next question is “have I got the means to generate this sum for the next 20 to 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 spreadsheet if you would like it to help you calculate the dreaded numbers. Just call on 09 945 4880.

Next month we will look at ways to help generate these funds.