Time for another review. I finally retired a few weeks ago (although I am still open to contract work!). I am now finding I am taking less interest in my finances. Why? I think it’s because most of my anxieties prior to retirement were about when I could retire. Now that I’ve done it, I’m not so worried any more. I’ve read this is quite a common experience, and it’s good that I can focus on enjoying my retirement now.
Headline Figures
| 2020 | 2021 | Planned 2021 | |
| Cash | $593,536 | $476,642 | $184,236 |
| Superannuation | $1,505,607 | $1,849,157 | $668,531 |
| Primary Residence | $1,218,772 | $1,588,400 | $1,131,105 |
| Investment Property | $322,391 | $349,600 | $275,292 |
| Total Assets | $3,640,306 | $4,263,799 | $2,261,166 |
| Asset Change | -1.79% | 16.99% |
| Change from 2020 to 2021 | Change from Planned to 2021 | |
| Cash | -26.92% | 158.71% |
| Superannuation | 22.82% | 176.60% |
| Primary Residence | 30.33% | 40.18% |
| Investment Property | 8.44% | 26.99% |
| Total Assets | 15.92% | 88.57% |
Total asset growth was an impressive real 16% (mostly due to a significant increase in the PPOR, but also due to reasonable real Super Growth of about 8.5%).
Spending and Income in 2020
Spending in 2020 was about $42K, which was a little less than last year, and much as expected. I’m thinking this is about our budget if we live reasonably modestly and with a few discretionary items. When I say modestly, this still includes regular restaurant meals, coffees, etc!
Here is how our spending was broken up:
Not too different than last year. Per month spending is shown below:
Income in 2020 was $143K made up as per the below:
Total savings was about $101K, or about 71% of income (slightly higher than last year).
Updated Spending Patterns
Here is the spending pattern if we stay in the PPOR (something looking more likely):
Average planned expense is now around $116K, which is about a 9% increase from last year , taking into account inflation. The planned expense dwarfs the actually expenditure from 2020, so I think it is a reasonable time to retire.
Here is the planned expense assuming a 2% reduction in spending to 75, and then selling the PPOR at this age:
Expense has gone up about 13% from last year taking into account inflation.
Conclusions
2020 has been a roller coaster of a year, but in the end has been quite benign from a financial point of view (and was actually quite a good year!). Now that I’ve retired, I might work on an online financial calculator (although I have many other competing interests). As we no longer have an income, subsequent years’ planned spending should settle down at around $116K, although if our future spending tracks our historic spending, it may grow.
I think the approach I’ve taken has been the right one. Tracking expense and working out planned expense and making sure the latter is quite a bit less than the former is a good means of working out when you can retire.
A couple of recent challenges I need to think about:
- Interest rates for term deposits are now very low, and actually lower than inflation in some cases. This is not something I planned on (I assumed banks would provide about 0.5% higher than inflation in my model). Also, the mainstream banks provide even lower interest rates. Using third tier banks should be OK as deposits are guaranteed below $250K, but this involves shuffling around funds, something that itself is a bit risky. In any event, the discrepancy against the model is not huge (maybe about $2K per year with the amount we have in cash at the moment, and this will reduce with time).
- Once I get to 60, I will need a good strategy for managing the funds in Super. I assumed in my model that I would move all funds to an account-based pension (in order to get the reduced tax), and spend more than the minimum withdrawal required. But we may end up spending less than the minimum, in which case we will have surplus cash. Should we only move some into the account based pension so we can withdraw less (and get the higher tax on the amount remaining), or should we put the lot into the account based pension and put the surplus into a Super-like fund? Maybe a subject of another post…!
Retiring early for Australians 