2015 in Review

Well, I haven’t blogged for a while. The main reasons are that I am still working (and spending very long hours at work!) and also I am not happy with my Mortality post and want to fix it up prior to proceeding [2016 – It is now fixed and I am quite happy with it!]

Anyway, I thought I’d make an exception and do a brief update on 2015 in review. In this post I will look at:

• Assets at the beginning of 2016 versus beginning of 2015
• Spending in 2015. Prior to retirement it is important to understand spending to see if the proposed budgeted spend in subsequent years is reasonable.
• Income in 2015
• Investment performance in 2015.
• Comparison of my plan developed at the beginning of 2015 with the new plan that has been generated on the basis of  actual results now available at the conclusion of 2015.

Headline Figures – Assets

Below are the planned and actual asset figures for the beginning of 2015 and the beginning of 2016 (all adjusted for 2016 dollars).

	Actual 2015	Planned 2016	Actual 2016	% Change on 2015 Actual	% Change on 2016 planned
Superannuation	$528,514.92	$542,765.73	$620,864.45	17.47%	14.39%
Property	$1,298,443.74	$1,299,767.73	$1,396,975.00	7.59%	7.48%
Cash	$604,505.09	$591,117.04	$708,406.92	17.19%	19.84%
Total	$2,431,463.74	$2,433,650.50	$2,726,246.37	12.12%	12.02%

Note that:

• Because I worked in 2015, and spent less than expected, Cash is better than planned (I was planning to live on some of the cash in 2015).
• Because I made a Super contribution and Super performed better than expected, Super is better than planned.
• Because of the recent increases in Australian real-estate prices, property is better than planned.
• Property values are derived from my bank estimates of property values, interpolated linearly over months during which the value does not change.

Spending in 2015

Total outgoings in 2015 were $114.6K. Of this $16.6K was employment tax, $30.1K was rent, $34.8K was a super contribution, $1.5K was withholding tax. Actual living expenses were approx $31.4K.

Interestingly the living costs were less than the age pension, which is quite surprising! Unfortunately our spending is in a foreign country, so these costs are not entirely indicative of future living costs.

I budgeted $40K for living costs in 2015, so we came in quite a bit below budget.

Here is the breakdown of living costs (total $31.4K). Note that I have tried to include a category whenever I have details of the associated costs:

Note that:

• My wife spent about 10 weeks in AU, hence the AU living costs.
• Water, Gas and electricity costs here are MUCH lower than Australia. Why are they so high in AU!
• Overall, costs are quite low here (excluding rent).

Income in 2015

Total income was $237.6K, made up of sources as below.

This income was dispersed as follows:

Note that:

• If I divide the amount spent (about $31.4K) by the employment income less tax (about 164K), this shows we are spending about 19% of our income, which is quite good!
• In my original plan, we estimated an post tax employment and investment property income of $25k, so this was quite clearly exceeded by quite a bit (as the original plan was to retire 2 months into 2015).

Investment Performance in 2015

Superannuation

Super was planned to increase at a real rate of 2.8%. The actual return (from my Super account numbers, not from the published Super figures!) was 6.92%. According to the ABS, http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0, the CPI from Sep Qtr 2014 to Sep Qtr 2015  was only 1.5% (the Dec to Dec figure is not available at present), which means the real rate of return for Super was 5.42%, much better than the predicted 2.8%!

Note that all figures are in 2016 dollars (i.e. I have modified the 2015 figure for inflation).

Cash

We have some cash in Term deposits and some in savings accounts. The interest earned, after withholding tax (10%, remembering that we are living in a foreign country) was about $14K, which represent a return of only about 2.3%. This is still above the 1.5% inflation, but not by much!

Note that figures are in 2016 dollars.

Comments on Investment Mix

Our original goal was to hold enough cash to last us until we have access to Super. As we can get access to Super when I am 58, and can get a lump sum to last us to 60, then it’s  clear that we probably should put $220K into Super.  Being risk averse, my heart tells me to leave this in Cash, but I guess that it is not  the right thing to do. So, I should do this transfer soon..

2015 Plans versus actuals graph

Here is the original spending plan at the beginning of 2015. This plan covers 2015 and beyond.

Note that this is in 2015 dollars.

And here is the updated plan with 2015 actuals. This covers 2016 and beyond.

Note that this is in 2016 dollars.

And here is the plans versus actuals.

Note that this is in 2016 dollars (including the 2015 figures). Also the surplus employment income also includes the difference in rent paid and rent received (about $2K).

Here is how the average spend has changed. All figures are in 2016 dollars.

Some relevant points:

• You can see that the pension has gone down quite a bit due to legislation changes. Whereas previously it was estimated we were eligible for the part pension at 74, now it is estimated that we will need to wait until 81!
• Notwithstanding the pension decrease, the overall spend amount has gone up slightly as I have not retired and the income received is a lot higher than originally planned. The amount to spend prior to 60 has gone up quite a bit
• Investment rental income was about $6K rather than $5K, slightly higher than predicted.

2016 and beyond

I am now thinking of working throughout 2016. The AUD exchange rate has gone down quite a bit, so effectively I have received a very large pay rise, which is kind of keeping me on. The work is quite interesting as well. It seems that I may be slipping into the one more year syndrome….

Still, I would really like to do some traveling!!