Carpe diem: why I worry about readers asking when they should retire

Travel, financial stress

This article by Caitlin Fitzsimmons has been republished with permission from The Sydney Morning Herald.

When I was a teenager my grandfather used to talk about his plans to travel around Australia with his wife.

He was particularly keen on the idea of visiting the Top End. I remember visiting his house in Sydney’s inner west and the television would be on in the corner, playing footage of Kakadu National Park with the sound turned down.

Twin Falls in Kakadu, Northern Territory. The big trip is often an aim for retirement.
Twin Falls in Kakadu, Northern Territory. The big trip is often an aim for retirement.

The big trip was always something he was going to do in the next year or two or when he retired.

Sadly, it never happened. Grandpa was diagnosed with prostate cancer in his early 60s and the illness progressed rapidly.

I was holding his hand when he drew his last breath. I was 20, fresh out of university, and soon to head off for adventures of my own in Costa Rica and Canada.

I think about this every time I see readers’ questions for our resident experts such as George Cochrane or Noel Whittaker asking when they can retire.

Now some people actually enjoy work. I do, and I’m comforted by the fact that I think my grandpa did too. But many of our readers seem desperately keen to stop working and get on with the rest of their lives.

Based purely on the finances, the expert advice always seems to be to keep working for longer.

I don’t know if I can agree.

The boring choice isn’t always the best choice. Of course, if you only live for today, you could wind up broke and miserable tomorrow. But if you only focus on maximising tomorrow, what happens if tomorrow never comes?

Surely, it’s a trade-off. Being a responsible adult and achieving a good life is about balancing immediate gratification with deferred pleasure.

It’s a highly personal decision whether retiring earlier is worth sacrificing a bit of comfort in old age, or whether you can stick at it and satisfy your itch to leave work with proper holidays and weekend hobbies.

Generally I’m a believer in carpe diem, or seize the day. The 1989 film Dead Poets Society was a formative movie of my early teen years, and not just because I thought Robert Sean Leonard was cute.

Robert Sean Leonard in Dead Poets Society.
Robert Sean Leonard in Dead Poets Society.

This is why I was intrigued when I saw a different perspective on retirement from financial planning firm Tribeca Financial.

Tribeca chief executive Ryan Watson emphasises life goals rather than maximising financial outcomes, and believes retirement could be the best option for many people.

The rule of thumb is usually that people should aim to save enough superannuation to retire on 70 per cent of their working life income.

But Tribeca’s analysis suggest most people live comfortably on half their income, if you consider that’s what’s left after tax and the cost of full-time work.

As an example, an $80,000 per year income would realistically be about $61,000 after tax. Minus a further 25 per cent, or $15,000, on work-related, non-tax deductible expenses, and there would be about $46,000 to live on.

You could further reduce the sum required if you were paying a mortgage as a working person, but retire debt free.

A recent ING Direct study revealed that Australians spend about $39 billion a year on work-related expenses. Non-tax deductible work expenses might include the cost of commuting, maintaining a work wardrobe, and work lunches.

Watson says for some, retirement may well a better option than going to work full-time, but they simply didn’t realise it.

“I always encourage people to consider what makes them happy, and what they actually need for wellbeing,” Watson says. “For many people it’s a lot closer than they think. Going to work is actually really expensive, but we don’t tend to look at it that way – it’s ingrained in us that we need to work to build a future and then retire.”

Tribeca’s model for full retirement still relies on a pool of assets such as property, shares and cash to generate the replacement income. But Watson says it can be achieved with as little as $250,000 in savings, depending on circumstances. Downsizing the family home can be one strategy.

I know in my own life I could live a lot more simply if I were not working. It’s not just the work expenses, but also the mentality of spending money to relieve stress or to reward myself for effort. It’s the “because I’m worth it” mindset.

I also love my job so retirement would be a long way off for me even if I owned my home outright and had anywhere near the quarter of a million in savings, which would have to be outside the super system given my age.

Yet it’s a good reminder to remember to enjoy the simple things. And to try to build a kitty outside super in case at some point in the future I want to or need to work less.

You might want to take time out to write a novel or travel around Australia, or less happily to care for a sick relative or because you lost your job and cannot find another. Anything could happen.

There are differing views about how much is needed in retirement.

The super lobby, through peak body the Association of Superannuation Funds of Australia (ASFA), suggests that retirees need a bit more than $43,000 for a single and just under $60,000 for a couple to achieve a “comfortable” lifestyle.

Critics such as the Grattan Institute object to these figures as inflated and point out it’s in the super industry’s interest to increase the amount of money in the super system. The ASFA definition of “comfortable” includes overseas holidays, which many working people can’t afford.

Ultimately it’s a personal choice. But remember many people don’t get to choose the timing of their retirement, but are forced to leave work because of ill health or because they lose their job and cannot find another.

Make sure you get the most out of your healthy years, and that means enjoying life, not just feathering your bed.

Author: Caitlin Fitzsimmons

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