Are you (or your parents) ready for retirement?

I started reading an eye-opening book about retirement.

The book: Cracking Open The Nest Egg by Martin Hawes.

I highly suggest this for your parents or yourself, no matter your age.

Now, although I’m already 'semi-retired' doing 50 hour weeks, which for me means doing work I love so it doesn’t always feel like "work", you might be wondering: why the hell am I reading about retirement at this stage of my life?

Well, often in life I like to look at people who are further down the path than me and think about what they have done or need to be ready to do.

For me, reading about retiring gets me thinking about important subjects well ahead of getting there.

In the book I was struck by an example that would allegedly be relatively common for people to aim for when retiring.

The idea is that you get to 65 with no debt on your house, and you have some funds set aside to invest that you can draw down on for the next 30 years.

Most retirement examples start with a freehold property as a given. The problem is, all of your cash is tied up in that asset, meaning you have little to spend.

The example was a $900,000 property and $100,000 vehicles (think camper vans or boats to enjoy), with no debt and $500,000 invested.

Note - I asked KTC Instagram followers how possible this was and 95% of the 500 people who voted said yes, achievable. I would imagine the % that achieve this is a lot, lot lower!

'The 4% rule' suggests that you could withdraw 4% of your original $500,000, (so $20,000 in year 1), and increase this each year for inflation and likely get through the next 30 years. Assuming a balanced portfolio of stocks and bonds. (Google the 4% rule to better understand it).

The example looks like this:

• A $900,000 home and $100,000 in vehicles, debt-free

• $500,000 invested, drawing down 4% p.a. ($20k min, increase for inflation)

• Superannuation (roughly $20,000 annually or double for a couple)

• Total income for an individual: $40,000 per year, no work required

Sounds comfortable, right? Maybe for a couple both getting superannuation.

But when I started to unpack it, things got tight quickly:

• Home costs (rates, insurance, maintenance, etc.): $12,000/year

• Utilities (power, internet, phone, etc.): $5,000/year

• Life or health insurance: ???

• Health care: ???

• Vehicle costs (fuel, servicing, registration): ???

That’s before groceries, hobbies, holidays, or doing anything.

Some of you at this stage will already think this example is ridiculous because who the hell has $500,000 invested!!??

The book refers to people more commonly getting to retirement with $250,000, as an investment rather than $500,000.

4% of this would be $10,000 minimum.

Some of my thoughts as I read this book:

• Inflation has made it harder than ever to retire comfortably. Many costs are up over 50% since 2019, including rates, postage, intl. travel, insurance. The book was released in 2022 and since then, well...inflation.

• Many people 65+ will need to stay in the workforce longer than they had probably expected to.

• Too few people think about retirement planning soon enough. Please don’t be one of them. Why don't we do the math?

• Rising costs mean retirees may spend their savings faster and they are living longer, leaving less for the next generation. Don’t bank on that inheritance too much!

If you have parents nearing retirement, (or even in their 40's), start having conversations now.

Talk about their plans, help them run the numbers, and consider whether they’ll need extra strategies, like turning a debt-free property into an income-generating asset (e.g., renting it out when they travel). Help them see some of these issues and solutions early.

I think it will become almost inevitable that when many 65+ year-olds holiday away from their debt-free property they will have to AirBNB or rent it out in order to truly turn it into an asset and have some income coming in to cover the costs of the property.

Retirement is a major topic and I have skimmed one example, only in the hope that it gets you thinking about your retirement or the retirement of your parents.

Please have these conversations and don’t ignore them.

Better still, pick up a copy of the book and give it as a Christmas gift.

Be bold,

Luke

P.s. You are one of 11,675+ recipients. The KTC podcast had over 70,000 audio downloads in November. Feel free to share a lesson with someone to help this reach more people. ___________________________________________________________________________ Did you know: In the 2018/19 period, the average annual expenditure for retiree households was $55,700 - Motu Research. A general basket of goods that cost $55,700 in 2019 Q2 would cost $69,085 in 2024 Q3. 

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