Money
It takes $74,000 a year plus some priceless prep before you retire
Money gets you to retirement. Mindset gets you through it. Nicole Pedersen-McKinnon shares what you really need to thrive beyond the 9 to 5.
By Nicole Pedersen-McKinnon
When we are counting down and gearing up for retirement, there is usually one thing on our minds: money.
And yes, it’s important to strive to amass as much as possible on which to live… for when you are no longer ‘living’ for work.
But that last bit is also a key, often-missed consideration: beyond living for work, what does life look like?
Because you probably need to line that up too – in advance.
Let’s start with the money you should target, then look at your just-as-important lifestyle aspirations… and other essential preparations.
How much money you need to retire
Now, this is a hotly disputed thing, but ASFA’s Retirement Standard calculation at least gives you a starting point for estimating your own income requirements.
Check here for more calculations: Calculating retirement - a Citro guide
It currently says that, to live comfortably from retirement at age 67, a single person needs $52,383 a year while a couple needs $73,875. (Note that these figures assume you no longer have to stump up for your housing – that is, you don’t rent and your mortgage is repaid.)
But to achieve that level of comfy non-working income, ASFA says it doesn’t take the $1 million lump sum that is often suggested.
No, provided you are willing to spend the lot over time (you’ll progressively earn more and more pension if you do), you need a balance at retirement of just $690,000 as a couple and $595,000 as a single. (Note just how much relatively cheaper it is when you share bills and expenses.)
Regardless of how comparable that ‘comfortable’ lump sum estimate is for you, or how close you will come to achieving it, there is more to work towards.
Because so few people, disregarding finances, prepare properly…
More than money: Your essential companion preparations
From decades helping people do it well, I have observed three essential non-financial preparations to getting retirement right … the things that really determine how satisfied you’ll be post-work.
These align with three well-accepted key elements of happiness:
Happiness element 1: Someone to love
Happiness element 2: Something to do, and
Happiness element 3: Some things to look forward to.
Of course, someone to love can be difficult to line up in advance. Or you may have it sorted already.
However, as adorable as you are, after you retire your partner may still want you out of the house… just a little bit of the time.
It can be healthy for a relationship, after all.
So be aware that we’re not just talking romantic ‘love’ here, but I will get into that as we delve into the last two aspects of a full and fulfilled post-work life. Starting with…
Your ‘something to do’
Right now, even if you don’t like the work you do, at least while you’re there, it consumes you.
And indeed, if you really love it, it might even ‘define’ you.
So – although the idea of stopping work might be appealing – what happens when you no longer have that identity?
For this reason, many Australians are now choosing not to retire, but instead re-wire.
They want the past-times. They want the purpose. They may just want them to look a little different. And, almost always, they want that on their own terms.
Indeed, they may want them to be rewarding in an entirely different way.
Think about whether there is something you would prefer to do that would both fill your cup and make you feel like you are contributing.
Because, liberated from the need to earn a regular income from work, you could do it for free. You could phase into a related pursuit, or even an entirely new one, that’s not financially rewarding but highly personally so.
And that’s why so many retirees volunteer at so many different places. Well, that and the social connections.
Think about it: at the moment, you may well have eight hours a day plus travel time committed to work.
And that could be for five days a week.
What replaces that in terms of not just the time it currently takes up, but the people with whom you get to associate?
This, including the personal interactions part, will require consideration well before you hang up your boots.
Then there’s the straight-up social side of your life…
Your important transition to a social ‘first’ existence
Amid a stretched and maybe stressed work regime, how often do you see friends right now?
Do you need to book seeing them a week in advance? Two? A month?
You will undoubtedly benefit – given that humans are social animals – from building that up in at least some respect as you approach retirement: your calendar needs to feature enough events of choice to keep you content.
Forget any expectations of being able to do this overnight; your friends won’t be ready or available.
You’ll need to establish your regular coffee/golf/walk, day-time dates slowly. Which brings us to: ‘some things to look forward to’.
Your ‘some things to look forward to’
Beyond the routine, ‘something to do’ side of retirement, most of us need ‘some things’ on the horizon to give us forward-focus and excitement about life.
I call that exquisite anticipation.
This is the flipside of the day-to-day activity equation that becomes particularly important in retirement: what are the longer-term, higher-value, higher-reward experiences you want to have once you stop work?
Sure, you might have your sights set on buying some stuff… that boat looms large (or small!) for some retirees.
But many a research paper on happiness suggests it’s not possessions that delivers this, but travel and good times shared with great people.
(With a big disclaimer that this is not financial advice, for some, it’s possible a boat would deliver a bit of both!)
So along those lines, what do you want?
What holidays are you hoping for? Road trips? Weekends with family? Cruises? Overseas trips?
Also think about your own personal development: courses, new hobbies, learning a new skill, taking up a new form of exercise… How are you going to keep stimulated and invigorated in retirement?
You will, finally, have the chance to enjoy yourself and live your life to the full – if you fully prepare.
Because as retirement approaches, it pays to be acutely aware that your money and your mindset need to work together to get you truly ready.
This article contains general information only. It is not financial advice and is not intended to influence readers’ decisions about any financial products or investments. Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their financial circumstances, objectives and needs.
Feature image: iStock/lucigerma
More ways to get retirement-ready: