Do I have enough money to retire?

Who

Lorraine is single and works as a senior manager for a large corporation in Melbourne's CBD. Lorraine is 59 and is starting to think about retirement. She travels from the south eastern suburbs into the city for work, and is starting to find the one hour commute tiring and stressful. Because she is starting to think about retirement she came to see us on the recommendation of her accountant.

 

QUESTIONS

At the meeting we discussed Lorraine's current situation. Lorraine was not sure when she could retire based on her income, her superannuation balance or her assets and liabilities.

 

Advice

We asked Lorraine to complete a budget of her current expenses. After determining which expenses would continue at retirement, which ones would increase and which ones would reduce, we had an annual figure that was reflective of Lorraine's income needs at the point of her retirement for her to feel comfortable and secure.

Lorraine's biggest need was to live a life of independence and dignity, because she had witnessed first hand the hardship her father went through at retirement due to not having enough money. For us, knowing and understanding Lorraine's values was very important, as we could see that what was important to Lorraine about money was "independence" and "dignity"... not necessarily having a large pool of money for the sake of having money.

 

Strategy

Once we had a clear understanding of what Lorraine's expenses were going to be at retirement, we had a basis to work with. From the annual expense figure, we derived what the size of Lorraine's asset base (net of lifestyle assets) needed to be to achieve the required level of income at retirement.

Once we had complete clarity about her current position, and where she needed to be, we were now in a position to provide strategic recommendations. Because Lorraine was single, she was not too concerned about leaving an inheritance. She just wanted to know that she would not run out of money in her later years.

Through a combination of tax reduction, investing and superannuation strategies, we could see that Lorraine would need to work at least until the age of 68. Whilst this was not what Lorraine wanted to hear, it was a kind of relief for her because now she had clarity. Yes, Lorraine had to adjust her expectations slightly in regards to her current lifestyle, however she could now plan her life for the future and had a reason to stick to a disciplined financial strategy.

 

Results

The reality is, if Lorraine had come to see us at age 55, she would have quite possibly been able to retire at age 64. The important thing is Lorraine now has more certainty, because she would have hated a surprise ten years into her retirement. As part of the process, we also updated Lorraine's personal insurances to ensure that if she fell sick, or had an accident or illness, her retirement plan could continue.