How much is enough?

Being financial planner’s, we’re frequently asked by clients and friends “how much capital should I have to retire on and how long will it last?”. The answer is generally….depends!

 

We all carry very different financial needs and capabilities into retirement and there is no single ’one size fits all’ answer. A convivial BBQ conversation could lead to a mistaken belief and an incorrect comparison of your own financial freedom could result in misguided choices.

For example, the optimal retirement capital can vary between families and decisions may depend on some of the following factors:-

  • How much of my personal wealth is invested in lifestyle assets with no income potential?
  • Do I intend to downsize my family home to release investment capital to meet future lifestyle spend?
  • Do I want to leave a financial legacy for my children?
  • Am I happy to deplete all my retirement capital during my lifetime?
  • Will I benefit from a family inheritance during my retirement?
  • Am I supporting other family dependants and will this continue in retirement?
  • What is my health horoscope?  Long-life family genes?
  • Am I retiring at an early age or well beyond normal retirement age?
  • Am I a cautious or confident investor?
  • Is my capital invested tax-effectively?
  • In addition to a lump sum super scheme, do I have a fully-indexed lifetime Government super pension to underpin future lifestyle needs (removes market and mortality risks)?
  • Is my spouse much younger than myself who will also rely on my retirement income/capital?
  • Defined Government super pensions generally reduce to 2/3rds on death when passed to a surviving spouse, will this be enough for my spouse to survive on?
  • Am I eligible for an Age Pension?
  • Am I concerned to retain sufficient capital to meet possible aged care accommodation needs?
  • Will my spend decrease as I age?
  • And of course, do I want or expect to maintain the same lifestyle in retirement?

 

Clearly any of the above factors could alter the answer to ‘how much is enough’ in retirement and will challenge your analysis on what combinations of potential solutions would be appropriate for your needs. What is suitable for one person may not be so for the next. Maybe having a pragmatic conversation with your financial advisor will provide clarity and an answer to what financial outcome is right for your unique situation, not just right for the person holding the BBQ tongs.

Having noted the above, as a guide, a 65 year retiree with $500,000 invested in a Balanced portfolio within an Account-Based Pension, seeking to receive say $48,000 p.a. pension, would fully exhausted their capital in 17 years (assumes 6.5% p.a. return). Similarly, a male/female with $1.2m invested and seeking to exhaust their capital by life-expectancy, could seek to spend $105,000 p.a. (84 years – male) or $98,000 p.a. (87 years – female). All scenarios exclude any Age Pension benefit or inflation.

What is the right answer for you…..… depends!

“Pinnacle always provides an excellent service. [My Advisor] has provided outstanding support to my two daughters and I since the death of my husband in August 2020. I would be happy to recommend this service to others.”
Margaret NRetired
“The Pinnacle team has guided the management of our financial circumstances for over 20 years, successfully navigating at least 3 significant economic cycles. Services have been rendered with total integrity and focus on our personal aspirations. During this time we have greatly appreciated the extension of PWM resources to assist a number of family members responding to particular situations along their personal lives' journeys.
Trevor & Carolyn CConsultants
“Pinnacle Wealth Management, who most importantly created a sound financial future for our comfortable retirement, go way beyond being a financial advisor, providing support to us and our children, as their needs have changed, at a strongly personable level. Their client focus is exemplary.”
Barry TRetired Accountant
“We have been Pinnacle clients for many years and have always found their advice to be considered relevant. The administration team is professional, courteous and timely. No hesitation in recommending the Pinnacle Team.”
Damien WRetired Head of Commercial Banking
“A friend recommended Pinnacle Wealth Management to me, having worked with them on his mother's behalf for many years. I'm so grateful to him - my Financial Advisor is brilliant, totally approachable, not as I'd imagined! I now have much greater clarity about financial management and greater peace of mind. For my money, they're the best financial planners in Adelaide.”
Jackie HCommunications Consultant
 “We are long term friends of [Pinnacle Wealth Management] having been clients since its inception. We have appreciated the professional advice and also the care and friendliness of [our advisor] and staff."
Ian WRetired
"We have been clients at [Pinnacle Wealth Management] for about 20 years. It has been a very enjoyable and profitable time for us. We have been safely steered through the GFC, both our retirements and various other major events that have shaped the nature of financial planning in our world. Through the entire time we have been delighted with the care and careful management of our funds through the leadership of [our now retired advisor] and the friendly and efficient support of all the ancillary staff. He has become a personal friend as well as the person whom we trust implicitly to handle our portfolio and to give us sage and pertinent advice on many areas of our concern. We will miss his presence but we are sure that he has chosen well with [our new advisor], and we look forward to forging a similar relationship with him.'"
Ray & Lyn HRetired
"We have been clients of [Pinnacle Wealth Management] since the inception of the business, about 20 years ago. Overall, we have been very pleased with the long-term handling of our financial affairs, the financial strategy implemented and the regular reviews to make sure we remain on track to achieve our goals. This includes regular informative communications. It has been great to receive sound advice and personalised service, tailored to our needs, covering many different tasks. When an emergency occurred, the excellent and swift service we received from the staff [at Pinnacle] was greatly appreciated. We wholeheartedly recommend [Pinnacle Wealth Management] as a Financial Adviser."
Kelvin & Melanie TConsultant
"My association with [my advisor] began many years ago, with a requirement to diversify my portfolio from bricks and mortar to Australian and International equities. At that time [my advisor] worked for another financial services business. I had no hesitation in following [my advisor] to Pinnacle. [My advisor] has the qualifications, but it is his experience and guidance that have been the founding safeguard for my family and I throughout the varying market conditions. [My advisors] expertise and guidance throughout the years has provided us in achieving our goals along with our family needs. His innovation and tailored strategies have kept us on track in reaching our desired endgame.
Tony SMaintenance
Previous
Next
Book a free consultation

Pinnacle Wealth Management Advisors are Authorised Representatives of
Pinnacle Dealer Services Pty Ltd, ABN 53 630 368 302, AFS Licence number 513743.

© 2024 Pinnacle Wealth Management
Website & Commercial Photography by Drawcard
Words by Jacqui