Retirement Housing Options
Australian Productivity Commission Research Paper
Retired Australians Housing Options – The Key points
- The most popular housing option for older Australians remains their own home. To support the ageing population, the Australian Government has been reforming and expanding the provision of home care services. This has benefits for the Government, as home care is cheaper to provide than residential aged care, and consumers, who prefer to age in place.
- The use of residential aged care is declining. Entry into residential aged care has become largely an end-of-life decision, driven by ill health and frailty.
- The Australian Government has reformed fee structures in residential aged care, to separate accommodation and care costs. However, there are still substantial restrictions around the supply of residential aged care, in addition to needs-based assessments that determine individuals’ eligibility for subsidised residential aged care. While rationing services based on need is important, existing supply restrictions are redundant and are stifling competition and innovation. As recommended by the Commission in 2011, removing supply restrictions will improve the housing and care options available to older Australians.
- The Commission’s survey of older Australians found that current levels of awareness and knowledge regarding aged care are low. Effective provision of information on housing and care options will support older Australians in making better housing decisions.
- An increasing proportion of older Australians are choosing to move into age-specific housing, primarily in retirement villages and manufactured home estates, reflecting financial and lifestyle preferences.
– Retirement village residents face a very complex structure of fees and charges. Reviewing state legislation that governs the financial models used by retirement villages may benefit both operators and residents.
– Security of tenure in manufactured home estates is relatively low, and this disadvantages residents.
– Commonwealth Rent Assistance is applied inconsistently across age-specific housing options, which creates inequities between similar older households.
- A substantial proportion of older Australians are in the private rental market. Low government subsidies and insecure tenure result in substantial disadvantage for this group. Commonwealth Rent Assistance and state-based residential tenancy legislation need to ensure low-income private renters are appropriately supported.
- The policies that affect older Australians’ housing decisions are very fragmented, and there is no strategy that recognises the spectrum of choices, and their effects on aged care services. This patchwork of policy makes it difficult for older Australians to transition from one form of housing to another, as their care needs change.
Evidence on older Australians’ housing decisions
Senior Housing Decisions – Older Australians Productivity Commission Research Paper
Senior Housing Decisions key points:-
- Housing is integral to people’s wellbeing, particularly for older Australians. For many older people home ownership provides security and independence in retirement.
- Older Australians strongly prefer to age in place. Most people are happy staying in their family home, despite a common perception that such homes are too big for them.
- For others, age-specific housing options provide more integrated accommodation and care, offer a way to release home equity, and may delay entry into residential aged care. Growth in retirement villages and manufactured home estates has been strong, despite planning restrictions.
- About 15 per cent of older Australians are renters, and these people are generally a highly vulnerable and economically disadvantaged group.
- There is a general lack of affordable downsizing options for older Australians, due in large part to the red tape and inconsistencies within state and territory land planning regimes.
- Residential aged care is effectively transforming into an end of life care service. The age of admission is increasing (now 83 years on average), average tenure is about 2 to 3 years, and care needs are higher.
- Many older people are reluctant to plan or get advice for possible future care and end of life needs. Decisions can be prompted by crises, and made when the person is vulnerable.
- There are positive signs from the recent reforms in aged care, including improved financial viability, transparency, and consumer sovereignty. However, further reform is needed.
- About 800 000 older Australians receive home care. Older people’s desire to age in place aligns with governments’ fiscal goals — in most cases, assistance for home care is
considerably less costly than for residential aged care. Nevertheless, there may be merit in increasing co-contributions for both home and residential aged care.
- Most of older Australians’ wealth is in the family home, but it remains an untapped source of retirement income. Many older Australians, including some of the poorest retirees, continue to save (spending less than their Age Pension) even very late in life. The main reasons for such behaviour are precautionary saving and a strong aversion to debt in old age.
− This precautionary saving is driven by uncertainty around longevity, health and residential aged care needs, and is a potentially expensive form of ‘self-insurance’ that can lower living standards in old age.
- Most older Australian home owners on low incomes could achieve a modest retirement living standard over the remainder of their lives by drawing on their home equity.
- Financial equity release products could facilitate withdrawal of home equity to fund retirement needs. However, this market is small and unlikely to grow in the near term:
− Most providers are diffident due to small market size and the risk of reputational damage.
− Broader reluctance by older people to tap into home wealth and strong aversion to debt, coupled with the high cost of such products are impeding demand. The tax and transfer treatment of the family home further reinforces this.
Sharing A Common Senior Care Retirement Village Story
One of the greatest memories that I have of my dad are how stubborn he was. At the time, it wasn’t something I was dealing with well, but now those memories are fond memories and I would give anything to have my stubborn dad with me right now.
When both my parents were diagnosed with cancer at almost the same time, I was angered, to say the least.
It was completely unexpected and it broke my heart. My mum died first. She was a gentle soul who didn’t like fighting and who accepted her circumstances with a smile. I think she knew I would have my dad with me, and he me, so it wasn’t hard for her to let go.
My dad was more resilient, more stubborn like I said. He refused to let the disease kill his fighting spirit, even though everyday I saw how much he missed mum, and how weak he was growing.
I had my own family to take care of at that time and so I couldn’t just leave my life and family to take care of dad. What’s even worse was that dad refused to move in with us. That meant that I had to take care of two homes at the same time.
Although insurance was paying for his treatment, I still had to feed him and pay for a housekeeper for him. A gardener had to come to his house every week, because he loved flowers and I wanted him to have something to look forward to when he woke up in the morning.
Most evenings of the week, I had to leave work early just to check on him and make sure he was doing okay and then go ahead and rush home to make dinner.
I felt like I was carrying the weight of the world on tired shoulders in those days. Sometimes I would wake up in the middle of the night crying and complaining, and feeling so guilty afterwards imagining what my dad was going through.
This went on for a few months until I got a job at a senior care retirement village.
I didn’t really put much thought into it, until one of my colleagues heard me speaking to my dad’s housekeeper on the phone and asked me if I wanted to share. Of course I did, otherwise I would explode from being so overwhelmed. Her solution was simple, but life-changing.
“Why don’t you have him come and stay here where he can be properly taken care of?” I immediately felt a load lifted off my shoulders, and accepted the offer amidst a sea of tears. When I asked my dad, he didn’t resist. I think he knew what I was going through and didn’t want to be a burden to me, though he wasn’t really. I was just a bit overwhelmed by everything.
He moved into the senior care retirement village the following week and I could start to see his spirits improve because he wasn’t alone at home with the same housekeeper. I even daresay the move to home care increased his life span just a bit. The doctors had given him two years and he lived almost three years after his diagnosis.
Even though I knew he was dying and there wasn’t much I could do, having him so close to me everyday at work was a blessing I will never take for granted. Fate was on my side. When he finally did leave, he didn’t look so sick and died a peaceful death.
After my ordeal, and almost a decade later, I am now a senior care retirement village professional in the same home that took such great care of my dad. I help people whose loved ones are dying and don’t know how to come to terms with it.
Sometimes I visit sick patients who refuse to be taken into home care, and after telling them my story they become more accepting of the idea. I found my silver lining.
Senior Rental Accommodation Benefits – Westminster Lodge
- No expensive upfront fees, just an initial refundable tenancy bond
- On-site Westminster Lodge Mackay managers (7 days a week)
- No hidden costs, just one rental fee (insurance, electricity and phone excluded)
- No exit fees
Senior Rental Accommodation Costs
There are many benefits at our Westminster Lodge Mackay community which represent excellent value. There are no hidden costs and no expensive upfront fees, just a weekly rental fee and a refundable tenancy bond equivalent to 4 weeks accommodation.
The Beautiful Mackay Region
Mackay is an amazing part of the Queensland coastline and boasts a glorious average temperature of 23 degrees Celsius. Nestled on the banks of the Pioneer River, Mackay offers pristine islands, national parks and a town with a genuine country charm. Go to the Community Map page to see where Westminster Lodge Mackay is situated in relation to shops, sporting venues and essential services.
What Is Assistance Living?
Currently there are a variety options available for care for the elderly due to the increase in life expectancy. There are a number of alternatives that makes it difficult and confusing to know and decide which one is best for you or your loved one. In this article you will be able to understand what it means by extra care living and assisted living and to be able to tell if it’s the best decision you can take or make for your loved one.
Assistance Living Prolongs Independence
Assistance living is known to ensure couples or individuals to live independently but in a specialist complex.
This is the best decision people can make when the find it difficult to live independently in their homes and especially if they do not need extra support and care. There are a variety of facilities and services offered in assisted living.
With it people get provide for prolonged independence in caring, safe, supportive and a socially active environment. People are given support in daily activities such as washing, cooking and cleaning and they are left to enjoy themselves by taking part in various activities.
Assistance living providers differ with what they offer
Providers for assistance living differ with what they offer. Most elderly people are benefiting from state-of-the-art facilities of assisted living and it’s important for the assisted living providers to have an alternative for residential retirement homes.
Services and facilities differ greatly from all providers whereby some have restaurants and onsite lounges where you can purchase lunch time meals and others offer a full hotel style services. This services include delivery of all meals in your apartment or served in the restaurant, laundry and a day maid service. Most assisted living places provide a 24 hour service with their staff available and give care packages. It’s thus advisable to choose and make your decision well.
Benefits of assistance living
- You get more privacy
- It’s safe and secure
- You can buy or rent your home
- You have staff that help you
- You stay together with your partner
- You have your own kitchen and bathroom
- You can have your own furniture
- You choose accommodation
- You own your house
- You own property in peace
- Controlled access
- You have freedom
Assisted living is the best because you live in your home, having independence and freedom and you have staff that support and give you security thus live with peace of mind.
If you want assisted living as the best option there are factors you will have to consider.
- The location
- Your future needs
- The facilities that are important to you
- The amount you can afford and the amount it will cost in order to do comparison
- Social interaction opportunities
- Whether the costs are genuine
- Whether the support and package provided is comprehensive
With assisted living you are provided for opportunities for social interaction and friendship whereby most of the retirement villages offer group activities regularly, exercise programmes and other activities. Additionally, you can try new hobbies, go on trips to places of interest or adventure and you can have fun in local entertainment places. For those who love reading there are onsite libraries. There are gardens where people in the retirement village with similar interests can bond and make friendship.
Assistance Living Facilities
Assisted living has a range of facilities that differ in that some may have shops, restaurants, hairdressers, fitness centres and cafes. Outdoor space also differs whereby some have expansive gardens you can have fun in without any back-breaking maintenance. In some retirement villages offer assisted living that is similar to five star hotels in that they include luxurious lounges, wellness spas. Beauty treatment rooms, landscaped gardens and craft rooms.
Most people who don’t require extra support or care prefer having assisted living. Assisted living has become an alternative for residential care.
Most people living in assisted living love it because they find more time to enjoy themselves.
With assisted living most people take life different and they get to maintain their social environment, freedom and have safe independence.
Mackay Retirement Village
When moving to a retirement village it’s important to consider the amenities and facilities that will favour you now and the future.
Moving can be very stressful because you need to cope with a new environment. Change of environment can result in stress and anxiety because of not being familiar with the place.
Therefore when moving to a Mackay retirement village you should consider the following factors in order to avoid having stress and anxiety:-
There are factors you should consider when moving to a Mackay retirement village, they are:
- Whether you want the village retirement to be in a rural setting with peace and tranquillity.
- Whether you want to stay in a village retirement within town.
- Whether you want to stay near family members and friends.
- If you want to stay in a retirement village in a rural setting with peace and tranquillity, you will have to ensure it has its own means of transport.
Read brochures and research online
Once you are sure of the location, you will use the approach when buying any property. Read through the details of the retirement villages you come across online or check on the brochures and then you can choose on what you want and ensuring they are genuine.
You can have a list of the details you want such as whether you want to live independently, community services that are provided, if you need assisted living later, entertainment services, local shopping places, health facilities, swimming pool to keep fit among other things.
With the internet and the provided brochures, you can shortlist the kind of amenities and activities offered in a given retirement village. You can also check on the nearby towns and see whether they offer what you are looking for.
Visit the retirement villages
It’s advisable to visit different retirement villages and see whether they match the ones in your list. For most people, once they walk into a new house they get to know it will be their next place of stay.
First impression always counts and you can tell from the way you are welcomed to the retirement village.
You can tell how genuine the staff is for your stay by talking to them. You can ask some questions that can help you see whether your stay in the retirement village will be okay. Some questions may be about the staff, whether the give the best services in a professional way. About the facilities provided and how well they are maintained. Whether you are provided for the leisure activities you wanted among others.
Talk to people living in the retirement village
The people you find in the retirement village will be your neighbours and friends and thus you need to know what kind of people they are and whether you can live with them. You can also ask them how it feels to stay in the village and the positive and negative side of staying there.
You need to get all this information in order to find the retirement village that is close to what you want.
You might be owning a car but there is a time you may not want to use it.
You need to know whether the retirement village offers transport and trips. When in the village you may prefer to use its transport because you will not need to park and you will be dropped off next to the shops or places you need to visit.
There are times you may need to go for trips events or places of interest. You may also need to visit the doctor and thus you need to know whether you need to pay more for these trips or they are already included to the amount you will pay.
This is the most important factor you need to check on before moving into the retirement village.
You need to be assured of the cost of the apartment and any other monthly fees you will need to pay.IN case there are any fluctuating fees you should avoid it as possible as you can. You should know the exact amount you need to pay and whether you will afford it. Also know whether the village you are buying into your assets will be protected.
Ensure that the retirement village has facilities that are helpful and very important in case your mobility and health declines. Check whether they offer transfer options from a retirement apartment that is far from the main hub to the main one. When moving to a retirement village at first apartments that are far from the main hub seem to be the best but once you have mobility issues you will need to move to the main hub.
You need to know whether there are apartments to be assisted living in the main centre and the facilities available. I hope I hope I helped you make the best decision.
Mackay Retirement Village with a Difference
Our Westminster Lodge Mackay community offers a real alternative to home ownership or traditional Mackay retirement villages. With no expensive upfront fees or hidden costs, Westminster Lodge residents enjoy a great lifestyle with quality accommodation at an affordable price.
Renting at Westminster Lodge Mackay gives you the opportunity to free up your capital so that you can enjoy the lifestyle you have worked hard for. Our community is a friendly and safe environment where you can enjoy modern living and personal service.
We also employ a maintenance team to take care of the gardens and we provide three meals a day. All of this is provided as part of your weekly rental. Marvellous!
6 Mistakes Retirees Make to Screw Up Their Retirement
When we think about the life events that you go through; getting married, having your first child, buying your first house; retirement is probably one of the biggest life events that you’re ever going to have, so you want to make sure that you have a goal and a solid plan. So what does that really mean?
Retiree Advice – Don’t make these mistakes
Hello, hello, hello. Jeff Rose from goodfinancialcents.com and founder of Alliance Wealth Management and I want to walk you through some of the six common mistakes I see that retirees make to screw up their retirement. I’ve been a financial advisor now for twelve years, I’m a Certified Financial Planner.
My bread-and-butter of what I do each and every day is helping people retire successfully.
So, what does that mean, retire successfully? That means that they can retire when they want, how they want and not have to worry that they’re going to run out of money. I help give them the confidence that they need, clarity that they need that they can retire. And not saying that my clients don’t watch the news because they do, but I try to help them prevent from just being so stressed out that they’re worried that they’re going to have to be eating dog food or cat food later on in life.
That’s what we want to try to prevent. And if you’re approaching retirement now or maybe you’ve already retired, you’ve been retired for a few years, you’re still going to get value out of this presentation and some of the stories I’m going to have to share with you. So, without further ado, let’s take a look at some of the six mistakes retirees make to screw up their retirement.
The very first thing that I… I won’t say always see, but I feel like nine and a half times out of ten what I see is that people don’t have a specific goal in mind. So what does that mean? So, basically they come to me and say “Hey, Jeff. I want to retire sometime like when I’m 60 or so” and I’m like “Okay and what else? I mean, you want to retire at age 60, do you know how much income you need? Do you know what you want to do in retirement?” So, they don’t have a specific goal in mind. You know, do you want to retire at a certain age?
If you tell me an age like that’s not even half the goal, that’s not even getting started. And you got to have a specific goal. I’m a huge believer in setting goals. I mean, I set goals every single quarter to making sure that I accomplish what I need to accomplish that quarter and then I actually set weekly goals and even daily goals and that just helps me stay accountable, helps me know what I’m looking to achieve.
And retirement… when I think about the life events that you go through; getting married, having your first kid, buying your first house; retirement is probably one of the biggest life events that you’re ever going to have, so you want to make sure that you have a goal, you want to make sure that you have a plan. So what does that really mean?
To me, when it comes to retirement planning, to establish a goal, you need to ask yourself these three questions and these three questions are going to be somewhat redundant to the rest of what I have to share today, but I just want to hammer it home because I think they’re that important. Number one, the first question you need to ask yourself to have your retirement goal is, how much do you need when you retire? How much do you need when you retire? And in large part I hate this question, many of my clients hate this question because they’re like “Jeff, how in the heck am I really supposed to know?
How am I supposed to know how much I’m going to need to retire? There are so many things going on” and I totally agree with that. I see that, I understand that, but just because you don’t know the exact number doesn’t mean that you can’t start at least thinking about it.
Because I have a lot of people that haven’t even thought about it. They might have a roundabout number what they need but they’ve never actually put a pencil to it. So, how do you actually figure out how much you need to retire? Well, actually let me give you an example. This is actually just a very recent example that I asked this exact same question to another client and they were in their early 50s, maybe early to mid-50s, and retirement was still a bit of ways for them.
So I asked them, how do you need to retire? And they had no idea. So we started with, we looked at their income- how much they were making. Now, in this case the wife was a stay-at-home mom and the husband worked. He was making a good salary, about a hundred and fifty a year or so. And so, we knew what their income is, like, okay, from there I learned that he was maxing out his 401k, so he was putting in the twenty-two thousand plus into his 401k.
They had two kids that were in college and they were paying their tuition a hundred percent and we estimated that was about twenty-seven thousand dollars a year.
One of them went to a private school. Twenty-seven thousand dollars a year that they were paying in college tuition. Over and above that, they were putting additional amount into savings, they had no debt; their house was completely paid off, they only had one car and that was paid off, so they really had no debt. So, when we started looking at how much they were making to how much they actually were putting away or just spending and putting away.
So, they’re putting in the 401k- you know, once we retire that won’t be happening anymore, we’re not going to be maxing in on the 401k when we retire, we’re not working. We figured that one of the kids is going to graduate, so that would be… one was going to graduate, one would be graduated by the time he would retire in a few years.
So that would be income that they wouldn’t need. We figured that roughly they weren’t using about fifty to fifty-five dollars of the income he was making. So, just off the cuff, I mean, we figured if he had seventy percent of his current income at retirement, then that would give them a decent amount. Now, in their case they’re very frugal, so I think that was probably overshooting what they needed, but what I want to walk you through this conversation I was having with this client because it helped us.
They didn’t know the exact number, but we started with what they are making now, we figured what they actually needed in expenses, what they wouldn’t, the expenses they would have at retirement and that helped us get a decent idea of how much they were going to need. And if you just are looking for a rough rule of thumb… you know, sometimes some advisers will use, “Take your current income and take seventy percent of that or take sixty percent of that” and that will give you a rough idea of how much you’ll possibly need when you retire. So that’s the first question you want to ask yourself: how much do you need when you retire? Another question you want to ask yourself is, how much have you saved?
You know, how much do you currently have in savings, in your 401k, in your savings account at the bank, in investment account, in IRAs?
Then, we also want to take into consideration other factors that we may have as far as pension and social security because the third question you’re going to want to know is, will your investments get you enough income to meet your retirement goal? So, when we took a look at how much you have saved, it’s funny because I know people that they have a 401k, they’ve got IRAs, they’ve got their savings account and if I had them tell me just off top their head, “Hey, how much do you have total in liquid savings?” and including their investments and whatnot and majority of the time they have no idea, they have no clue.
They have a rough idea but they don’t know and sometimes I have fun with it, I make them guess and typically I make people guess. I mean, they’re off tens of thousands of dollars, which is a significant amount of money that they don’t know is there, which is sometimes funny, sometimes it’s a little scary, but add up all your savings.
There are tools that we use, we help clients aggregate all their investments so they do know exactly how much they have and then they answer the third question of will investments get you enough income to meet your retirement goal? Right now, so what we’ll do is we’ll take a look at what they’ve saved, what they’ve invested, how much that’s accumulated to be currently. We’ll take a look at what they’re currently saving now and guesstimate how much that will increase based on what they’ve been saving, what they’ll continue to save until the day they’ll retire and then we’ll look at social security, we’ll look at pensions, we’ll look at any liabilities, any debts that they still may have when they plan to retire and we just run some numbers.
You know, we start crunching some numbers and figure based on how much you have saved, how much you will have saved and if we start taking a percentage off that each and every year, is that going to get us enough?
And it’s a really good exercise to go through because it may light the fire underneath your butt and make you realize “Damn, I have not saved enough and if I have any hope of retiring when I think I want to, then I’ve got to change something now.” You know, that could be saving more, spending less, downsizing your home, cutting back some bills, whatever that is. And that’s why it’s so important to do retirement planning not when you’re a year off from retiring. I love this couple that came to me, they anticipate about ten years before they plan on retiring, so that’s a good decade. And a lot of changes could be made in a decade to improve the chances of them retiring. Obviously, I would love for people to come even earlier.
Those that are meeting with me in their 40s or even 30s at least are getting the ball rolling, but these are the types of things that you want to ask yourself. So, once again, you need to ask yourself, how much do you need to retire? How much do you have saved and how much will you continue to save until you retire? And will your investments get you enough income to meet your retirement goal?
So we think about wanting to have a goal and wanting to make it better than a general goal. One of the most common types of goals you hear is called the SMART goal. And what is a SMART goal? What does it stand for? Well, SMART is an acronym, it stands for specific, measurable, attainable, realistic and time-related.
Now, once again, that’s SMART- S is specific, M is measurable, A is attainable, R is realistic, T is time-related. So, what does a SMART goal look like when it comes to retiring? Here’s an example: “I want to retire at age 62 with $750,000 of investable assets that will yield me approximately $45,000 a year of income including my pension and social security.”
Now, if someone came to me and sat down in my office and say, “Hey, what is your goal retiring?” and they spit out something like this, I would literally get up from my desk, walk around and give them a big bear hug because I love this. I would love for this to happen. Does this happen? In my experience, no. maybe a half a time out of ten. I’ve had a few people that I’ve wanted to give a bear hug. I didn’t feel like we knew each other well enough for me to do that so I refrained, but I wanted to.
But when that does happen man, I’m grinning ear to ear because I love it. I love that these people really thought it through, they’ve planned and they make my job that much easier. But, typically, that doesn’t happen. So, let’s break it down a little bit what this goal is and why it’s so good. So, first thing we’re going to look at… we have specific, measurable, realistic and also time-related. So, the time-related thing, age 62. They’re telling me, boom! I want to retire at 62 not about 60 or maybe after 65, I’m not that sure. They’re giving me an actual specific goal. They’re also making a specific, measurable and realistic- $750,000 in investable assets. Now, that’s specific, it’s measurable, is it realistic? Depending on when they come to me. You know, if they’re 55 years of age and they have $100,000 in their 401k and that’s all they have, then that is not realistic.
I’ll give you one example of a younger client that I met with that he was in his late 30s and he wanted to retire when he was 50, he was making 200 and him and his wife I think they were making between 250 and 350 thousand dollars a year, they both worked. Which were amazing salaries. Unfortunately, whenever I take a look at what they had saved at that point- I don’t have the exact dollar amount, I’m just going to guesstimate. I know I’m within a couple thousand dollars when I say this number. They had roughly $18,000 saved total, everything. That was their 401k, they had no IRAs, that was their checking and savings- between the two of them- $18,000. And when he told me he wanted to retire at age 50, I’m just like, how is that going to happen? That was not realistic. There was no way, no chance at all that that was going to happen.
So, it has to be realistic. So, if this person is going to retire with $750,000 in investable assets and they’re 55 right now, I better hope they’ve got at least five hundred if not more. So what else are we looking at? What else is specific and measurable and realistic? $45,000 a year of income. So, once again it’s specific. They’re telling me the dollar amount; it’s measurable, how much they need per year including their pension and social security it could be very well realistic. So that is the epitome of what a SMART goal is all about.
Alright. Moving on to number two. What is the second mistake that people make that screw up their retirement? The second thing is they focus on what they want to make versus what they need to make. And this is a really big one for me. I see a lot of people struggle with this. So they focus on what they want to make versus what they need to make.
And I think of one client situation in particular and this situation actually I’ve gone through it several times, but I had a gentleman that- husband and wife- we sat down with them and we get all the numbers and they’ve got no debt, their house is paid off, they pay for everything in cash, they’ve got other cash savings, they’ve got social security and we take a look at all their investments; they’ve got a sizable portfolio. I mean, they’re definitely over the one million dollar mark in savings and investable savings, he’s at retirement his retirement age so he can already draw social security and he can get all that.
And when I started taking a look at how much they actually need to make, you know, how much they actually need to make from their investable assets… I’m guesstimating that if they could make anywhere between four, five on the high side 6% return on their investments, then that would be more than sufficient to get them to the retirement income that they need.
The best way to see Westminster Lodge Mackay seniors assisted living facility / community is to visit in person.
Give our friendly Westminster Lodge Mackay village managers a call today and book an inspection. Phone 07 4955 0088.
How much money do you need to retire?
This is a question everyone faces at some point in their life because everybody wants to retire someday.
Today, I’m going to go ahead and share with you guys how much exactly you need……
Retirement Nest Egg Advice
How much money do you need to retire? This is a question everyone faces at some point in their life because everybody wants to retire someday. The question is: how much do you need?
Today, I’m going to go ahead and share with you guys how much exactly you need, but more like, what kind of goals you should have when you’re about to retire and what type of assets you should have already acquired in your life. I can’t wait to share this with you guys today.
Good day, subscribers. Thank you so much for joining me today on the Financial Education channel. So today, we’re talking about “How much money do you need to retire?” How much money do you need to retire?
So today, I’m going to walk through with you guys how much money you need, but the exact plan. So, I’m not just going to share with you guys a finite amount of money. Like a lot of times on commercials and whatnot for financial programs and whatnot, fidelity or whoever, they’ll run these commercials to say “Oh, you need a million dollars to retire; 1.2 million dollars or eight hundred thousand” or whatever.
I’m going to share with you guys amounts of money you want to have in each category of assets, so it’s going to be much more into detail than just “Oh, you need a million dollars to retire, bye-bye.” Now, we’re going to into detail today. So, for this video, we’re going to assume you want to live a normal retirement. So, comfortable, nice, you can take trips and things like that, but not like going to France every other week or Monaco or Beijing or all those crazy stuff; just normal amount of trips, maybe one every couple of months, three, four real vacations a year, take a little trips to see your grandkids.
Things like that that you want to do in retirement. Not something crazy but also not a lifestyle that’s so plain Jane you never get to do anything. So, we’re going for the normal, nice retirement plan. So, let me erase all this here. And for the sake of the video, we’re going to go ahead and we’re going to assume your retirement age is age 65. So, now for my generation, people in their 20s, I mean, 65 might be super young.
In the future, 65 is a nice retirement age now, but for my generation, if everybody’s living to be a hundred or a hundred and ten or whatever, it might be like “You probably don’t retire until you’re eighty or whatever.” But for the sake of this video, we’re going to go ahead and do retirement age of 65. I seriously need to get a big eraser because this little teeny eraser, it drives me nuts on this board, it drives me crazy.
I need to go to staples and get a big one. Anyways, 65 retirement age. That’s the age.
Retirement Nest Egg
So, first things first, by that age you’re going to want to own a home outright that you were probably living in while you were raising your kids and whatnot and then you continue to live in that home when they went off to college and then maybe they moved back in for a little bit amount of time until they found a job and then they went out and about and then you still probably continued living in that home until your retirement.
So, what you want to have is a home that’s worth at least three hundred thousand dollars. That’s the law- three hundred thousand dollars and I’m going to do everything based off today’s numbers just to keep it simple because if I’m doing my retirement age at 65, which is like almost forty years from now, who knows what the dollar is going to be worth? So we’re going to keep everything in today’s terms just to keep the video simple. So, you need to have a house that’s worth at least three hundred thousand dollars. Now, when you’re going to go ahead and retire you’re going to go ahead and sell this house.
You’re going to put it on the market, as long as the housing market is okay at that time, and you’re going to go ahead and downsize because that four, five, six bedroom house or whatever you had when you had all those kids and whatnot, you probably don’t need that today. You need to just go ahead and downsize and that’s what you’re going to want to do because you want to keep it simple. You don’t want to take care of all those extra bedrooms and all that extra space and dust and cleaning and the whole thing; the yard work, it’s insane. So, you’re going to want to go ahead and buy a home that’s two hundred thousand.
Maybe you stay in the same state you’ve been living in, maybe you go out to Arizona and retire in Sun City or out in Nevada or Florida or one of those states that are nice to retire in. Maybe that’s the decision you make but no matter what, you’re going to want to find a house around two hundred thousand. So basically, you’re going to end up booking about a hundred thousand profit here. So, a hundred thousand and that is going to go straight into your savings category. It’s going to go anywhere else, it’s not going to go into stocks, anything like that; it’s going to go straight into your savings. So, a hundred thousand, boom, straight there.
Now, there’s going to be something that I suggest you acquire as soon as your retirement starts and this might sound a little funny because I don’t usually suggest buying a new car, but at this age, I suggest you buy a brand spanking new car. So go out and spend forty thousand. So you can take that out of this category if you would like. So then, you basically have sixty thousand going into your savings.
So, that’s going straight into your savings category. Now, the reason I suggest buying a nice car is because, one, you deserve it, it’s retirement time. You deserve to have a nice car that’s brand new and mainly because you’re 65, you don’t want to worry about it. and also, it’s all going to be under warranty, you’re not going to have to worry about bills coming in or the engine going out or something happening with the transmission and flooding money out for some car you’ve owned for the last ten, fifteen years or whatnot. You want to just keep it simple, you want to be able to take trips- road trips- and whatnot without having to worry about that car. So that’s the plan there.
So this sixty thousand is going to savings. Now, I want you to have in your savings and when I say savings, I mean like cash savings or in a savings account type savings, I want you to have a minimum of a hundred thousand in there. So, if you have one hundred thousand, you have another sixty thousand in here, you basically are going to end up with a hundred and sixty thousand in savings. My handwriting is horrible, just so you guys know. You probably already know that. So you got a hundred and sixty thousand in savings right now.
Now, as far as your 401k, you’re going to want to have a minimum of five hundred thousand dollars in that 401k. So you worked your whole career and whatnot, you put money away every week or every two weeks, whenever you get your paycheck, into that 401k. So you want to have a minimum of five hundred thousand in 401k. So, basically, so far what we have for assets; we’ve got a two-hundred-thousand-dollar home we own, okay?
That’s owned outright, you don’t pay a mortgage on that. Nothing. Just your homeowner’s insurance and that’s about it. You got five hundred thousand in a 401k, you have a hundred and sixty thousand in basically cash savings.
The last piece of this that I want you to have come retirement time is a minimum of two hundred and fifty thousand in stocks. And if you don’t know how to invest in stocks and you’re not comfortable with that, you’re probably going to want to find somebody that knows a lot of crap about stocks. That way they can tell you where to invest and whatnot, but I suggest you are the one that’s actually doing the trades and whatnot and not just having someone else control it and taking money out of the pie. So, hopefully, you can find a friend or something that really knows their stuff about stocks. So, two hundred and fifty thousand in stocks. So, why two hundred and fifty thousand in stocks?
And why is this amount kind of low? Because a lot of people say all you need is a million dollars or whatnot in your 401k. Well, I suggest putting a little less toward your 401k your whole career and taking that money you could have been putting in your 401k into investing in stocks doing it yourself because you don’t get any fees taken out when you do it yourself. Whereas, this way you get fees and a lot of times you can pick better stocks than what they pick for you in here. Here they’re just going to pick you an index.
You’re just going to automatically get whatever the index makes that year. So if the index goes up five percent you go up five percent, and if the index goes down ten percent, you’re going to go down ten percent. That’s the way it works for 401k. So, now we have two hundred and fifty thousand dollars in stocks, you have a two-hundred-thousand-dollar home you own, you have a forty thousand dollar car, but we’re not going to count that because it’s kind of a liability. We have one hundred and sixty thousand in cash savings, you have five hundred thousand in 401k. So, let’s just erase this number here and then let’s go ahead and erase these numbers so we can just keep track of everything we got here.
So, now at this point, your bills are going to be very low. You have no mortgage because your house is paid for. You have no car bill because your car is paid for. So your biggest bill is really going to be probably health insurance. Maybe that’s five hundred, six hundred dollars a month for you and your spouse total, maybe it’s seven hundred, I don’t know. It’s obviously going to depend on a lot of health factors and whatnot, but that’s your biggest bill. That’s your biggest bill by far.
Car insurance is going to be super cheap because car insurance is super cheap for anybody that’s older. I know my parents are in their 50s and the rates they pay are like sick low. Like, I’m like “Oh, my Gosh! I wish I could pay that kind of price.” So, the bills are going to be very minuscule; you’ll have your electric bill, water bill, things like that. But let’s say your bills are… I would say fifteen hundred dollars a month.
So, fifteen hundred dollars a month times… let’s say ten months, we’ll have fifteen thousand, you add another three thousand on to that, so eighteen thousand dollars is what you have in bills per year. So now, you need to make eighteen thousand or take it out of somewhere every year because those eighteen thousand in bills need to be paid. The reason I have the two hundred and fifty thousand up here in stocks is, let’s say you’d get just ten percent a year. So, between dividends and what the shares go up, let’s say you just get that ten percent a year. That’s twenty-five thousand dollars per year, then you pay your taxes on that.
That’s twenty thousand you could be making that can go straight toward the bills. So your bills are already covered by just what you’re making in income from stocks because if you get ten percent a year from two hundred and fifty thousand it’s twenty-five thousand, you take that twenty-five thousand out every year, you get taxed on it, you have twenty thousand left; you still got two thousand extra at the end of the day.
And maybe you have little things here and there you buy and whatnot so that maybe could be what the two thousand goes toward. Now, you still have this five hundred thousand in your 401k, you still have your home of course, and you still have a hundred and sixty thousand in savings. So what you can do is slowly take out of your 401k to go do all that fun stuff. So maybe you budget five to ten thousand dollars a year on vacations or whatever; to go on cruises, to go on trips or whatnot.
It can come straight out of this 401k area. So that way, this two hundred and fifty thousand can always stay here and this one is still going to stay relatively stagnant because you’re still going to be making money on this. It’s not like that money is just five hundred thousand and that’s it; you’re still going to be making percentages on this money here. So, the little bits of money you’re taking or whatever a year is going to probably come right back to you because you’re going to be making percentages on that money.
Maybe it’s five percent, maybe it’s eight percent, maybe it’s seven percent; somewhere around there, but on five hundred thousand, that’s enough to cover. So you can do ten thousand dollars’ worth of vacation a year, you’re going to pay all your bills and whatnot and you still will always be in a revolving door of beautifulness. You’re still going to always have this hundred and sixty down here, this five hundred is basically never going to move, your two hundred and fifty thousand in stocks is basically never going to move and your house value hopefully that appreciates a little bit over time. So you’re really protected, you’re really in a nice situation. A very nice situation.
And then, if you want to even make it even an extra trip or a more elaborate trip, you can still do that because you’re not going to live forever. I mean, we’re all going to die someday. So, you’re just in a beautiful revolving door and that’s how it’s done- making percentages on your money through stocks on your own account and on your 401k and it just pays for everything itself. So, that is how it’s done, guys. That is what you basically need to retire.
And if we add up these amounts here: two hundred and fifty thousand plus two hundred thousand on the house, that’s four hundred and fifty thousand. One hundred and sixty, so we’ll just say it’s one hundred and fifty for easy sake, that’s six hundred thousand. That’s 1.1 million. So, it’s basically 1.1 million dollars in different kinds of assets on what you could live a very, very comfortable retirement. Very comfortable retirement.
I mean, we could all dream about that type of retirement where you can take all these trips and spend fifteen thousand dollars a year on vacation, are you kidding me? Drive a brand new car, live in a comfortable house and whatnot. That is the life.
So, I hope you guys enjoyed this video today on how much money you need to retire. Thank you so much for watching. If you haven’t subscribed you may want to. We talk so much about personal finance videos like this, I talk a little bit about the stock market and a little bit about business. So, thanks for watching, guys. And have a great day.
The best way to see Westminster Lodge Mackay seniors assisted living facility / community is to visit in person.
Give our friendly Westminster Lodge Mackay village managers a call today and book an inspection. Phone 07 4955 0088.
4 Costly Errors Most Early Retirees Make
Mistake #1: Not planning for health insurance costs before Medicare kicks in
How are going to pay for health insurance before Medicare kicks in? Because you generally can’t apply for Medicare benefits before age 65. Most people get health insurance through their employer and porting your health insurance through COBRA is expensive and only available for up to 18 months after you terminate employment…….
Early Retirement Advice
Hey Everybody, Dieter Scherer here fee-only financial planner and founder of Realise Your Retirement. Today we’re talking about the 4 Errors Most Early Retirees Make.
Mistake #1: Not planning for health insurance costs before Medicare kicks in
How are going to pay for health insurance before Medicare kicks in? Because you generally can’t apply for Medicare benefits before age 65. Most people get health insurance through their employer and porting your health insurance through COBRA is expensive and only available for up to 18 months after you terminate employment.
So make sure you have a plan in place to take this into account so you’re not left without health care insurance between retirement and starting Medicare.
Mistake #2: Failure to plan for how much will you need each year
Most people do not plan their retirement expenses accurately and it’s one of the most common errors we see amongst early retirees. People generally need more during retirement than the often stated 70% income replacement ratio offered up by many as the gold standard.
In practice, I usually see most people spending close to 100% of their pre-retirement income. Most people grossly underestimate the amount of money they will need each year, especially when they retire early and are much more active with travel and other activities.
Mistake #3: Not Owning Equities in your portfolio
Simply put, not owning equities in your portfolio will set you up for failure during retirement, especially when you retire early. With interest rates close to zero right now, CDs and bonds will not give you the returns you need to have your portfolio survive all the way through retirement. The higher expected returns from stocks or equities will allow your portfolio to survive longer during your retirement.
And finally, mistake #4: Applying for Social Security at the Wrong Time
Most people apply for Social Security as soon as they are eligible. If you retire early it might make sense to take Social Security so that you have a larger income each month, but the fact is that you need to consider a whole lot of other factors before you apply.
These include taxes, how long you are expected to live, whether your spouse is eligible for benefits, and how much you and your spouse can expect to receive each month and your other sources of retirement income.
To answer these questions I’ve made a free video course available over at FreeSocialSecurityCourse.com, a link will be in the description below. The free course goes through the future of Social Security, the rules of Social Security, and how to maximize Social Security benefits.
I hope today’s video has offered you some good value, if you have any questions or comments, let me know in the comments below. Have a great day!
The best way to see Westminster Lodge Mackay seniors assisted living facility / community is to visit in person.
Give our friendly Westminster Lodge Mackay village managers a call today and book an inspection. Phone 07 4955 0088.
There’s Life After Retirement
At the conclusion of a lifelong career cycle, each of us must willingly or reluctantly retire. This requires a pivotal decision about what to do with the rest of our life.
One option is to continue working such as seeking work that is within our skill level but less intense. This may be functioning as a consultant or working on a reduced hour basis.